Redfearn v. Trader Joe's Company

Filed 3/16/18 (unmodified opinion attached)
CERTIFIED FOR PUBLICATION
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION SEVEN
WAYNE REDFEARN, B270487
Plaintiff and Appellant, (Los Angeles County
Super. Ct. No. BC559822)
v.
ORDER MODIFYING
TRADER JOE’S COMPANY, OPINION AND DENYING
REHEARING
Defendant and Respondent. (NO CHANGE IN
JUDGMENT)
THE COURT:
It is ordered that the opinion filed herein on February 27,
2018 be modified as follows:
1. On page 4, the paragraph beginning “The trial court
sustained Trader Joe’s’ demurrer without leave to amend.
Relying on the holding and analysis in . . .” delete the words “the
holding and analysis in.”
2. The entire paragraph commencing at the bottom of
page 10 with “A jury found in favor of plaintiffs” and continuing
on page 11 is deleted and replaced with:
A jury found in favor of plaintiffs as to the $780,000
advance and also found that Stewart’s agent and attorney had
knowingly and intentionally disrupted the performance of
six subpromoter contracts involved in the transaction, awarding
damages of $1.6 million. (PM Group, supra, 154 Cal.App.4th at
p. 61.) The court of appeal reversed the judgment in favor of
plaintiffs on the cause of action for intentional interference with
contract and affirmed the judgment in all other respects. (Id. at
p. 70.) The court held, as a matter of law, Stewart and his agents
could not have interfered with the performance of the
subcontracts on two grounds. First, quoting the Supreme Court’s
language in Applied Equipment that the tort could only be
committed by “‘strangers—interlopers who have no legitimate
interest in the scope or course of the contract’s performance’”
(PM Group, at p. 65), the court explained, “a contracting party is
incapable of interfering with the performance of his or her own
contact and cannot be held liable in tort for conspiracy to
interfere with his or her own contract.” (Ibid.) Then, without
further analysis, the court concluded, “Because the subcontracts
at issue here provided for Stewart’s performance, neither Stewart
nor his agents can be liable for the tort of interfering with the
subcontracts.” (Ibid.) Second, noting that Stewart and the
concert promoter had not entered into a binding contract for
Stewart’s performance, the court explained, “[N]one of the
subcontracts among plaintiffs and the subpromoters could have
been performed. Accordingly, defendants cannot be said to have
caused the failure of the subcontracts . . . .” (Ibid.)
3. In the last sentence of the paragraph immediately
following subheading 2C of the Discussion delete the word “the”
2
and insert in its place “some of the language and” so that the
sentence reads:
Unlike the trial court, however, which must follow controlling
precedent from a court of appeal, we are free to disregard some of
the language and reasoning of our Division Three colleagues in
PM Group, even while agreeing with the outcome of that case.
4. Delete the entire second paragraph following
subheading 2C of the Discussion beginning with “Plaintiffs in PM
Group failed to prove a cause of action.” Insert in its place the
following paragraph and new footnote 4:
Plaintiffs in PM Group failed to prove a cause of action for
intentional interference with contractual relations because, as
the court, held, Stewart never agreed to the proposed concert tour
and, therefore, his decision not to participate, which necessarily
defeated the purpose of the subcontracts, did not constitute an
intentional act designed to induce a breach or disruption of the
promoter-subpromoter contracts, an essential element of the tort.
(See, e.g., Reeves, supra, 33 Cal.4th at p. 1148 [the third of the
tort’s five elements].) To be sure, Stewart’s performances in
various venues were contemplated by, and necessary to the
success of, the contracts between PM Group and the
subpromoters, so that Stewart and his representatives had a
legitimate interest in the scope or course of the contracts’
performance. But the cause of action failed as a matter of law,
not because Stewart was not a “stranger” to the contracts
between the promoter and its subpromoters, but because his
decision not to perform, without more, was not tortious.4
__________________________
3
4 The Supreme Court in Quelimane Co. v. Stewart Title
Guaranty Co., supra, 19 Cal. 4th 26, held a complaint alleging a
defendant title insurer had refused to sell title insurance on any
real property acquired at tax sales, which led to the termination
of subsequent transactions to resell such properties, stated a
cause of action for intentional interference with existing
contractual relations. (Id. at pp. 56-57.) The complaint, however,
alleged the refusals were pursuant to an unlawful conspiracy
among several title insurers not to insure tax sale properties.
(Id. at pp. 35-36, 57.) The Court also held whether plaintiffs
could prove defendant “intended to interfere with land sale
contracts when it denied title insurance . . . [is] a matter for
trial.” (Id. at p. 57.)
5. In the first sentence of the first full paragraph on
page 15, beginning with “Here, unlike PM Group’s complaint that
Stewart had cancelled the proposed concert tour. . .” delete and
replace the word “cancelled” with “abandoned” so that the
sentence reads:
Here, unlike PM Group’s complaint that Stewart had
abandoned the proposed concert tour (albeit preceded by
misrepresentations relating to certain advance payments),
Redfearn did not allege that Trader Joe’s simply stopped
purchasing from Seneca and Sunsweet, thereby disrupting
Caliber’s brokerage contracts.
There is no change in judgment. Respondent’s petition for
rehearing is denied.
____________________________________________________________
PERLUSS, P. J. ZELON, J. SEGAL, J.
4
Filed 2/27/18 (unmodified version)
CERTIFIED FOR PUBLICATION
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION SEVEN
WAYNE REDFEARN, B270487
Plaintiff and Appellant, (Los Angeles County
Super. Ct. No. BC559822)
v.
TRADER JOE’S COMPANY,
Defendant and Respondent.
APPEAL from a judgment of the Superior Court of
Los Angeles County, Gail Ruderman Feuer, Judge. Reversed and
remanded with directions.
Outwater & Pinckes, David E. Outwater and Randi E.
Pinckes for Plaintiff and Appellant.
O’Melveny & Myers, Dawn Sestito and R. Collins Kilgore
for Defendant and Respondent.
_______________________
Wayne Redfearn appeals from the judgment of dismissal
entered after the trial court sustained without leave to amend the
demurrer of Trader Joe’s Company to Redfearn’s first amended
complaint for intentional interference with contractual relations,
intentional and negligent interference with prospective economic
advantage and unfair competition. We reverse.
FACTUAL AND PROCEDURAL BACKGROUND
1. Redfearn’s Complaint for Interference by Trader Joe’s
with Caliber Sales and Marketing Corporation’s Broker
Relationship with Two Food Suppliers
In his first amended complaint, filed September 3, 2015,
Redfearn alleged he purchased Caliber Sales and Marketing
Corporation, a food brokerage business, in 2001 and remained its
largest shareholder until leaving the company in late 2014. At
the time Redfearn severed his relationship with the company,
Caliber assigned its legal claims against Trader Joe’s to
Redfearn.
Caliber represents manufacturers of food products and
assists them in marketing their products, operating like an
outside sales team in placing products in retail outlets and
processing order flow once the relationship is established.
Caliber began acting as a broker for Seneca Foods Corporation in
2003 and Sunsweet Growers Inc. in 2006 and successfully
introduced their products into Trader Joe’s stores.
Trader Joe’s changed its policy toward food brokers in 2010
and stopped working with brokers in finding new products for its
stores. However, Trader Joe’s generally continued to deal with
food brokers on existing accounts.
According to Redfearn’s first amended complaint, in a
meeting with a Seneca representative in January 2014, Trader
2
Joe’s executive Jon Basalone falsely accused Redfearn of
spreading rumors that Trader Joe’s employees were soliciting
bribes and that paying a bribe was the only way to do business
with them. Redfearn alleged Basalone made these false
statements to encourage Seneca to stop using Caliber as a broker
in Seneca’s sales to Trader Joe’s and further alleged that
Basalone had stated, although he was aware Seneca might have
a contract with Caliber, Seneca must terminate its relationship
with Caliber or Trader Joe’s would replace Seneca as a supplier.
As a result of this conversation, Seneca terminated its contract
with Caliber with respect to supplying its products to Trader
Joe’s.
Redfearn also alleged Trader Joe’s exerted pressure on
Sunsweet and made similar false statements to Sunsweet
designed to tarnish Redfearn’s professional reputation, causing
Sunsweet to terminate its contract with Caliber to supply food
products to Trader Joe’s.
2. Trader Joe’s’ Demurrer and the Trial Court’s Order
Sustaining the Demurrer Without Leave To Amend
Trader Joe’s demurred to the first amended complaint,
asserting only a stranger to a contract can be liable for
interference with contractual relations and arguing it was not a
stranger to Caliber’s contracts with Seneca and Sunsweet
because the performance of those contracts depended on Trader
Joe’s’ purchase of Seneca’s and Sunsweet’s products. Trader Joe’s
contended it could not be liable for interference with prospective
economic advantage for the same reason, that is, Trader Joe’s
could not be liable for disrupting a potential relationship that
was dependent on its own performance. In addition to arguments
focusing on its close relationship to the Caliber-supplier
3
contracts, Trader Joe’s argued Redfearn had not adequately
pleaded its conduct was independently wrongful, a necessary
element for interference with prospective economic advantage.
Redfearn opposed the demurrer to his three interference
causes of action, but agreed to voluntarily dismiss the unfair
competition cause of action.
The trial court sustained Trader Joe’s’ demurrer without
leave to amend. Relying on the holding and analysis in
PM Group, Inc. v. Stewart (2007) 154 Cal. App. 4th 55 (PM Group)
and distinguishing Asahi Kasei Pharma Corp. v. Actelion Ltd.
(2013) 222 Cal. App. 4th 945 (Asahi) and Powerhouse Motorsports
Group, Inc. v. Yamaha Motor Corp., U.S.A. (2013)
221 Cal. App. 4th 867 (Powerhouse) in its eight-page ruling, the
court found Trader Joe’s was not a “stranger” to Caliber’s
contracts with Seneca and Sunsweet because the performance of
those contracts depended on Trader Joe’s purchasing products
from the two suppliers: “Trader Joe’s had the absolute right not
to purchase food from the suppliers going forward. Indeed, given
its contract with Seneca and Sunsweet, Trader Joe’s had the
power to control that agreement by taking steps to ensure that its
suppliers did not use brokers by terminating any suppliers that
used brokers in their transactions.” Accordingly, the court ruled,
Trader Joe’s was not liable for intentional interference with
Caliber’s contracts by refusing to purchase Seneca’s and
Sunsweet’s products if they continued to use Caliber as a broker,
“regardless of the nature of Trader Joe’s conduct.” Similarly,
because Trader Joe’s was not a stranger to the contracts at issue,
applying the holding of Kasparian v. County of Los Angeles (1995)
38 Cal. App. 4th 242, 266, the court concluded Trader Joe’s had no
4
liability for intentional or negligent interference with prospective
economic advantage.1
In a footnote the court explained it did not need to reach
Trader Joe’s’ alternative argument that it was not liable for
intentional interference with contractual relations because the
contracts between Caliber and the food processors were
terminable at will. In another footnote the court identified as an
independent ground for sustaining the demurrer to the causes of
action for interference with prospective economic advantage the
failure of Redfearn to allege any independently actionable
conduct by Trader Joe’s. The court stated Redfearn “has not
pleaded an independent tort of defamation, nor does he make an
offer of proof as to how a defamation claim could be alleged.”
The court entered a judgment of dismissal on January 6,
2016. Redfearn filed a timely notice of appeal.
1 The court in Kasparian v. County of Los Angeles, supra,
38 Cal. App. 4th 242 held the principle that one who is not a
stranger to a contract cannot be liable in tort for interfering with
the performance of the contract applied equally to both
intentional and negligent interference with prospective economic
advantage. (Id. at p. 266 [“[w]hatever may be the exposure of the
nonparty interferer, the principles announced in Applied
Equipment [Corp. v. Litton Saudi Arabia Ltd. (1994) 7 Cal. 4th
503] clearly should apply to bar a tort claim against a party to a
prospective relationship”].)
5
DISCUSSION
1. Standard of Review
A demurrer tests the legal sufficiency of the factual
allegations in a complaint. We independently review the superior
court’s ruling on a demurrer and determine de novo whether the
complaint alleges facts sufficient to state a cause of action or
discloses a complete defense. (Loeffler v. Target Corp. (2014)
58 Cal. 4th 1081, 1100; Committee for Green Foothills v. Santa
Clara County Bd. of Supervisors (2010) 48 Cal. 4th 32, 42.) We
assume the truth of the properly pleaded factual allegations,
facts that reasonably can be inferred from those expressly
pleaded and matters of which judicial notice has been taken.
(Evans v. City of Berkeley (2006) 38 Cal. 4th 1, 20; Schifando v.
City of Los Angeles (2003) 31 Cal. 4th 1074, 1081.) However, we
are not required to accept the truth of the legal conclusions
pleaded in the complaint. (Zelig v. County of Los Angeles (2002)
27 Cal. 4th 1112, 1126; Tepper v. Wilkins (2017) 10 Cal.App.5th
1198, 1203.) We liberally construe the pleading with a view to
substantial justice between the parties. (Code Civ. Proc., § 452;
Ivanoff v. Bank of America (2017) 9 Cal.App.5th 719, 726; see
Schifando, at p. 1081 [complaint must be read in context and
given a reasonable interpretation].)
“‘Where the complaint is defective, “[i]n the furtherance of
justice great liberality should be exercised in permitting a
plaintiff to amend his [or her] complaint.”’” (Aubry v. Tri-City
Hospital Dist. (1992) 2 Cal. 4th 962, 970-971.) We determine
whether the plaintiff has shown “in what manner he [or she] can
amend [the] complaint and how that amendment will change the
legal effect of [the] pleading.” (Goodman v. Kennedy (1976)
18 Cal. 3d 335, 349.) “[L]eave to amend should not be granted
6
where . . . amendment would be futile.” (Vaillette v. Fireman’s
Fund Ins. Co. (1993) 18 Cal. App. 4th 680, 685; see generally
Ivanoff v. Bank of America, supra, 9 Cal.App.5th at p. 726.)
2. Redfearn Has Adequately Stated a Cause of Action for
Intentional Interference with Contractual Relations
a. The elements of the cause of action
“California recognizes a cause of action against
noncontracting parties who interfere with the performance of a
contract. ‘It has long been held that a stranger to a contract may
be liable in tort for intentionally interfering with the performance
of the contract.’ [Citation.] [¶] However, consistent with its
underlying policy of protecting the expectations of contracting
parties against frustration by outsiders who have no legitimate
social or economic interest in the contractual relationship, the
tort cause of action for interference with a contract does not lie
against a party to the contract.” (Applied Equipment Corp. v.
Litton Saudi Arabia Ltd. (1994) 7 Cal. 4th 503, 513-514
[fn. omitted; italics in original] (Applied Equipment).)
The elements of a cause of action for intentional
interference with contractual relations are “(1) the existence of a
valid contract between the plaintiff and a third party; (2) the
defendant’s knowledge of that contract; (3) the defendant’s
intentional acts designed to induce a breach or disruption of the
contractual relationship; (4) actual breach or disruption of the
contractual relationship; and (5) resulting damage.” (Reeves v.
Hanlon (2004) 33 Cal. 4th 1140, 1148 (Reeves); accord, Applied
Equipment, supra, 7 Cal.4th at p. 514, fn. 5; Pacific Gas &
Electric Co. v. Bear Stearns & Co. (1990) 50 Cal. 3d 1118, 1126.)
It is generally not a requirement that “the defendant’s conduct be
wrongful apart from the interference with the contract itself.”
7
(Quelimane Co. v. Stewart Title Guaranty Co. (1998) 19 Cal. 4th
26, 55.)
b. Applied Equipment and the disagreement over the
meaning of “a stranger to the contract”
The Supreme Court in Applied Equipment, supra, 7 Cal. 4th
503, held a party to a contract cannot be liable in tort for a
conspiracy to interfere with its own contract. (Id. at p. 514.)
Plaintiff in that case (Applied Equipment Corporation) had
procured spare parts for a military contractor (Litton). Under the
terms of the subcontract between plaintiff and the contractor,
plaintiff was entitled to a commission based on the purchase
price. After plaintiff had issued a purchase order for 11 electron
tubes to a third party supplier (Varian), the contractor purchased
six tubes directly from the supplier without paying any
commission and renegotiated plaintiff’s purchase order, reducing
the number of tubes in the purchase order from 11 to six,
resulting in a reduction in the total commission paid to plaintiff.
(Id. at p. 508.) Following a jury trial, judgment was entered in
favor of plaintiff and against both the contractor and the supplier
on causes of action in contract and tort, including conspiracy to
interfere with contracts (both the subcontract and the purchase
order). (Id. at pp. 508-509.)
The only issue before the Supreme Court was whether the
third party supplier could be liable for conspiring with the
contractor to interfere with its own contract with plaintiff.
(Applied Equipment, supra, 7 Cal.4th at p. 509.) Reversing the
court of appeal, which had rejected the supplier’s argument, the
Supreme Court explained, “One contracting party owes no
general tort duty to another not to interfere with performance of
the contract; its duty is simply to perform the contract according
8
to its terms. The tort duty not to interfere with the contract falls
only on strangers—interlopers who have no legitimate interest in
the scope or course of the contract’s performance.” (Id. at p. 514.)
The Court continued, quoting a law review commentator, “‘While
the imposition of liability in tort upon the non-party interferer
may be justified in all cases for his intentional disruption of the
contractual relation, the party who merely breaches his contract
should in all cases be exposed only to contractual liability as he
has not assumed the role of an intentional interferer. To impose
tort liability upon the contract breaker because of the
involvement of a third person (when liability is limited to
contract damages when the contract breaker is acting alone)
undermines the policies which have developed limited
contractual liability.’” (Id. at p. 517.)
Although the holding of Applied Equipment was limited to
liability for conspiracy to interfere with a party’s own contract, as
discussed, in describing the elements of, and policy basis for, the
tort, the Court stated that liability for intentionally interfering
with the performance of a contract was properly recognized only
for an “outsider” or “a stranger to a contract,” which the Court
appeared to define as one with “no legitimate social or economic
interest in the contractual relationship.” (Applied Equipment,
supra, 7 Cal.4th at p. 513; see id. at p. 514.) The Court also
clarified that nothing in its opinion was intended to suggest the
contractor could not be liable for direct interference with the
purchase order between its subcontractor and the third party
supplier or that the supplier could not be liable for direct
interference with the subcontract, “provided that each of the
elements of the tort of interference with contract is satisfied.”
(Id. at p. 521.)
9
Relying on Applied Equipment’s broad definition of “a
stranger to a contract,” our colleagues in Division Three of this
court in PM Group, supra, 154 Cal. App. 4th 55 held, if a contract
expressly contemplated and depended upon a noncontracting
party’s performance, the noncontracting party had an economic
interest in that contract and could not be liable for interference
with, or disruption of, its execution. (Id. at pp. 58, 65.)
PM Group involved a lawsuit by a concert promoter doing
business as PM Group, Inc. and two subpromoters against singer
Rod Stewart and Stewart’s company, manager, attorney and
agent. (Id. at p. 57.) Stewart’s agent and the concert promoter
had engaged in extended negotiations for a nine-city concert tour,
and the promoter entered into subcontracts with parties in each
of the cites the proposed tour would visit. While negotiations
continued, plaintiffs advanced $780,000 to Stewart’s
representatives based on various assurances the tour would take
place. Ultimately no agreement was reached, and Stewart did
not proceed with the concerts. (Id. at pp. 58-60.) The promoter
and two of the subpromoters sued for return of the $780,000 on
counts of unjust enrichment, money had and received and
negligent misrepresentation. Plaintiffs also alleged causes of
action for interference with the subpromoter contracts.
A jury found in favor of plaintiffs as to the $780,000
advance and also found that Stewart’s agent and attorney had
knowingly and intentionally disrupted the performance of
six subpromoter contracts involved in the transaction, awarding
damages of $1.6 million. (PM Group, supra, 154 Cal.App.4th at
p. 61.) The court of appeal reversed the judgment in favor of
plaintiffs on the cause of action for intentional interference with
contract and affirmed the judgment in all other respects. (Id. at
10
p. 70.) The court held, as a matter of law, Stewart and his agents
could not have interfered with the performance of the
subcontracts on two grounds. First, quoting the Supreme Court’s
language in Applied Equipment that the tort could only be
committed by “‘strangers—interlopers who have no legitimate
interest in the scope or course of the contract’s performance’”
(PM Group, at p. 65), the court held, “[b]ecause the subcontracts
at issue here provided for Stewart’s performance, neither Stewart
nor his agents can be liable for the tort of interfering with the
subcontracts.” (Ibid.) Second, noting that Stewart and the
concert promoter had not entered into a binding contract for
Stewart’s performance, the court explained, “[N]one of the
subcontracts among plaintiffs and the subpromoters could have
been performed. Accordingly, defendants cannot be said to have
caused the failure of the subcontracts . . . .” (Ibid.)
Other courts of appeal have not read Applied Equipment as
broadly as did Division Three in PM Group and, when discussing
PM Group, have distinguished it based on its particular facts.
For example, in Asahi, supra, 222 Cal. App. 4th 945, the court held
a corporate defendant that had acquired as a subsidiary an entity
with an existing license agreement was not immune from suit for
interference with the agreement on the ground it was not a
stranger to the agreement: “‘[A] stranger,’ as used in Applied
Equipment means, one who is not a party to the contract or an
agent of a party to the contract.” (Id. at pp. 963-964.)2
2 This statement in Asahi is a quotation from the decision in
Woods v. Fox Broadcasting Sub., Inc. (2005) 129 Cal. App. 4th 344
in which the appellate court held persons or entities with an
ownership interest in a corporation are not immune as a matter
11
Distinguishing PM Group, the Asahi court explained, “Unlike in
PM Group, Defendants’ performance was neither contemplated
nor necessary to the License Agreement.” (Asahi, at p. 965,
fn. 14.)
Similarly, in Powerhouse, supra, 221 Cal. App. 4th 867,
Division Six of our court refused to apply the “stranger to the
contract” rationale to reverse a jury verdict in favor of plaintiff on
its cause of action for intentional interference with contractual
relations, holding, notwithstanding its legitimate economic
interest in its franchisees’ business activities, a motorcycle
distributor was not immune to a tort claim based on its
interference with a contract for the sale of a dealership by a
franchisee to a third party. (Id. at pp. 883-884.) The court
declined to “expand[ ] the scope of Applied Equipment” to protect
a noncontracting party who had “‘some general economic
interest’” in the contract. (Ibid.)3
Most recently, in Popescu v. Apple Inc. (2016) 1 Cal.App.5th
39, 53, decided six months after the trial court’s ruling in the case
at bar, the court held, “An extension of Applied Equipment’s
holding to immunize a third party from tortious interference
claims simply because the third party asserts some economic or
of law from liability for interfering with their corporation’s
contractual obligations. (Id. at p. 353.)
3 Like the court in Asahi, the Powerhouse court quoted from
Woods v. Fox Broadcasting Sub., Inc., supra, 129 Cal.App.4th at
pages 352 and 353. Curiously, though, without citing PM Group,
which was decided after Woods and before Powerhouse, the
Powerhouse court stated, “No published California case has
disagreed with Woods or expanded the scope of Applied
Equipment.” (Powerhouse, supra, 221 Cal.App.4th at p. 884.)
12
other interest in a contract would significantly undercut the tort
itself and the public policy underlying it.” The Popescu court
reversed a judgment dismissing plaintiff’s complaint against
Apple Inc. for intentional interference with contractual relations
and intentional interference with prospective economic
advantage based on his claim Apple had taken affirmative steps
to convince his employer, which had a research and development
agreement with Apple, to terminate him in retaliation for his
resistance to Apple’s alleged anticompetitive conduct. Among the
arguments advanced by Apple and rejected by the court was the
claim that it was “not a stranger” to plaintiff’s at-will
employment contract within the meaning of Applied Equipment
because it had a legitimate economic interest in making sure
individuals staffing its project would not cause Apple any harm.
(Popescu, at p. 52.) The court concluded that “Apple, even as a
third party having some interest in the manner in which Popescu
performed his employment agreement with Constellium, is not
immune from tort liability for interfering with his contract.”
(Id. at p. 56.)
c. Trader Joe’s was a “stranger” to Caliber’s contracts
with Seneca and Sunsweet
Caliber’s brokerage contracts at issue in this lawsuit were
contingent upon the decision of Trader Joe’s to purchase products
from Seneca and Sunsweet. Unless that occurred, Caliber’s
contracts could not be performed. As the trial court ruled,
Caliber’s interference claims thus appear to fall within the
holding of PM Group, supra, 154 Cal. App. 4th 55, which broadly
stated a noncontracting party is not a stranger-interloper when
that party’s performance is necessary to the plaintiff’s contract
performance or prospective economic relationship. (Id. at pp. 57-
13
58, 64-65.) Unlike the trial court, however, which must follow
controlling precedent from a court of appeal, we are free to
disregard the reasoning of our Division Three colleagues in
PM Group, even while agreeing with the outcome of that case.
Plaintiffs in PM Group failed to prove a cause of action for
intentional interference with contractual relations, but the court
misidentified the fundamental defect in the interference claim.
To be sure, Stewart’s participation in the proposed concert tour
was contemplated by, and necessary to the success of, the
contracts between PM Group and the subpromoters, so that
Stewart and his representatives had a legitimate interest in the
scope or course of the contracts’ performance. But the cause of
action failed as a matter of law, not because Stewart was not a
“stranger” to the contracts between the promoter and its
subpromoters, but because plaintiffs could not allege Stewart or
his agents engaged in any intentional acts designed to induce a
breach or disruption of the promoter-subpromoter contracts, an
essential element of the tort. (See, e.g., Reeves, supra, 33 Cal.4th
at p. 1148.) Stewart simply decided not to perform, and the
subcontracts failed as a result. That decision was not tortious.
(See Imperial Ice Co. v. Rossier (1941) 18 Cal. 2d 33, 37 [“The act
of inducing the breach must be an intentional one. If the actor
had no knowledge of the existence of the contract or his actions
were not intended to induce a breach, he cannot be held liable
though an actual breach results from his lawful and proper
acts.”].)4
4 The court of appeal’s alternate holding is equally flawed.
That there was no binding contract between Stewart and the
concert promoter has no legal significance in evaluating the
sufficiency of a claim that Stewart interfered with the promoter’s
14
Here, unlike PM Group’s complaint that Stewart had
cancelled the proposed concert tour (albeit preceded by
misrepresentations relating to certain advance payments),
Redfearn did not allege that Trader Joe’s simply stopped
purchasing from Seneca and Sunsweet, thereby disrupting
Caliber’s brokerage contracts. Rather, according to Redfearn,
Trader Joe’s pressured the two suppliers to stop using Caliber as
a broker, which allowed Trader Joe’s to purchase food products
directly from Seneca and Sunsweet while eliminating the cost of
brokerage fees. The situation before the court in PM Group is
readily distinguishable on this basis.
Attempting to defend the judgment in its favor, Trader
Joe’s cites Sweeley v. Gordon (1941) 47 Cal. App. 2d 385 (Sweeley)
and Zimmerman v. Bank of America (1961) 191 Cal. App. 2d 55
(Zimmerman) and argues, apart from the holding in PM Group,
the term “stranger” in this context is not narrowly limited to a
nonparty to the contract at issue, but properly refers to a
nonparty to the entire transaction. According to Trader Joe’s,
“[t]hese cases illustrate that a non-contracting defendant is not
liable for interference where that defendant is part of the
transaction contemplated by the contracting parties.”
Sweeley, supra, 47 Cal. App. 2d 385, affirmed a judgment of
dismissal after the trial court sustained the demurrer to a real
estate broker’s complaint against a buyer for inducing the seller
to breach his contract with the broker. Sweeley held the seller
contracts with the subpromoters, as PM Group held. (PM Group,
supra, 154 Cal.App.4th at p. 65.) And it certainly is the case,
contrary to the court of appeal’s holding, that Stewart’s decision
not to undertake the concert tour “caused the failure of the
subcontracts.” (See ibid.)
15
was entitled to rely on the statute of frauds; and, by inducing the
seller to assert the statute of frauds, the buyer did not unlawfully
induce the seller to breach the contract. (Id. at p. 387.)
Whatever the continued validity of this holding in light of
developments in the law during the ensuring 75 years (see, e.g.,
Della Penna v. Toyota Motor Sales, U.S.A., Inc. (1995) 11 Cal. 4th
376, 387-391 [reviewing development of economic relations tort in
California], Sweeley did not suggest, let alone hold, the buyer was
not liable because he was a party to the transaction.
Zimmerman, supra, 191 Cal. App. 2d 55, held a real estate
broker could maintain a tort cause of action against a bank for
inducing the parties to a real property exchange to breach their
oral contract with the broker despite the fact the oral contract
5
was voidable under the statute of frauds. (Id. at pp. 56-57.)
Zimmerman explained the protection of the statute of frauds
should not inure to “a stranger who seeks the destruction of the
transaction and whose status fundamentally differs from that of
the party whom the statute seeks to protect.” (Id. at p. 61.)
Zimmerman distinguished Sweeley, supra, 47 Cal. App. 2d 385, on
the ground that, arguably, the protection of the statute of frauds
should extend to the buyer as “a party to the transaction” who
5 Buckaloo v. Johnson (1975) 14 Cal. 3d 815, disapproved on
another ground in Della Penna v. Toyota Motor Sales, U.S.A.,
Inc., supra, 11 Cal.4th at p. 393, fn. 5, cited Zimmerman, supra,
191 Cal. App. 2d 55, with approval and similarly held a real estate
broker could maintain a cause of action for interference with
prospective economic advantage against the buyer who had
induced the seller to sell the property without paying a
commission despite the fact the statute of frauds rendered the
broker’s oral contract with the seller unenforceable. (Buckaloo,
at p. 827.)
16
would benefit from the nonpayment of the broker’s commission.
(Zimmerman, at p. 61.) The bank, in contrast, indisputably was
a “stranger to the transaction.” (Ibid.) Although Zimmerman
distinguished Sweeley on this basis, contrary to Trader Joe’s’
contention, it did not decide the statute of frauds would protect
the buyer from tort liability as “a party to the transaction.”
(Zimmerman, at p. 61.)
In sum, consistent with Popescu, supra, 1 Cal.App.5th 39,
Asahi, supra, 222 Cal. App. 4th 945, Powerhouse, supra,
221 Cal. App. 4th 867, and Woods v. Fox Broadcasting Sub., Inc.
(2005) 129 Cal. App. 4th 344, we conclude that one, like Trader
Joe’s here, who is not a party to the contract or an agent of a
party to the contract is a “stranger” for purpose of the tort of
intentional interference with contract.6 A nonparty to a contract
that contemplates the nonparty’s performance, by that fact alone,
is not immune from liability for contract interference. Liability is
properly imposed if each of the elements of the tort are otherwise
satisfied.
6 As discussed, relying on the holding of Kasparian v. County
of Los Angeles, supra, 154 Cal. App. 4th 55, the trial court ruled
Trader Joe’s’ legitimate economic interest in the Caliber-
Seneca/Sunsweet contracts shielded it from liability not only for
intentional interference with contract but also for intentional and
negligent interference with prospective economic advantage. Our
conclusion Trader Joe’s’ status as a “stranger” to those contracts
exposes it to liability for intentional interference with contract
applies equally to its potential liability for the closely related
prospective economic advantage torts.
17
d. Redfearn need not allege an independently wrongful
act to state his cause of action for interference with
contract
Inducing termination of an at-will contract is actionable
interference with the contractual relationship. (Pacific Gas &
Electric Co. v. Bear Stearns & Co., supra, 50 Cal.3d at p. 1127;
Beckwith v. Dahl (2012) 205 Cal. App. 4th 1039, 1053.) And, as
discussed, a defendant’s wrongful conduct apart from
interference with the contract itself generally is not an element of
the tort of intentional interference with contract. (Korea Supply
Co. v. Lockheed Martin Corp. (2003) 29 Cal. 4th 1134, 1158
(Korea Supply) [“intentionally interfering with an existing
contract is ‘a wrong in and of itself’”]; Quelimane Co. v. Stewart
Title Guaranty Co., supra, 19 Cal.4th at p. 56 [same].)
Notwithstanding these principles, citing Reeves, supra,
33 Cal. 4th 1140, Trader Joe’s argues, because the brokerage
contracts with Caliber were terminable at will, Redfearn must
allege an independently wrongful act to plead a viable cause of
action. The requirement that plaintiff plead and prove an
independently wrongful act to establish liability for interference
with certain at-will employment agreements, recognized in
Reeves, does not apply in the commercial brokerage setting at
issue here.
Reeves, supra, 33 Cal. 4th 1140, involved a dispute between
the former employer of several at-will employees and their
current employer. The current employer (a law firm) had induced
the employees to quit their jobs (with another law firm) and come
to work for it. (Id. at pp. 1145-1146.) The Supreme Court held
under these circumstances the former employer could recover
damages for intentional interference with its at-will employment
18
agreements with its former employees only if the current
employer had engaged in an independently wrongful act. (Id. at
pp. 1152-1153.) The Court explained that public policy supports
competition in the workplace, including the hiring away of an at-
will employee, as long as the methods used are lawful and that
interference with a contract terminable at will is primarily an
interference with the expectancy of future relations between the
parties. (Id. at pp. 1151, 1154.) “Under this analysis, an
interference with an at-will contract properly is viewed as an
interference with a prospective economic advantage, a tort that
similarly compensates for the loss of an advantageous economic
relationship but does not require the existence of a legally
binding contract.” (Id. at p. 1152.) By requiring a plaintiff to
plead and prove the defendant’s conduct was independently
wrongful, “we respect both the right of at-will employees to
pursue opportunities for economic betterment and the right of
employers to compete for talented workers, and in doing so strike
the proper balance between society’s interest in fostering robust
competition in the job market and its interest in protecting
against unlawful methods of competition.” (Id. at p. 1154.)
The holding in Reeves is properly limited to the situation
the Supreme Court actually considered: an employer inducing
at-will employees to leave their current positions to come to work
for it. As the court explained in Popescu, supra, 1 Cal.App.5th
39, which involved an action by a former employee against a
third party that had allegedly induced his employer to terminate
his at-will employment, “[T]he Supreme Court based its
conclusion that interference with an at-will employment
relationship was not actionable without an independent wrongful
act upon the dual public policy considerations of employee
19
freedom of movement and a business’s right to legitimately
compete in the marketplace.” (Id. at p. 62.) Those policy
considerations apply when a former employer sues the current
employer for inducing its employee to terminate his or her at-will
employment, as occurred in Reeves. However, when a third party
induces the breach of an at-will employment agreement not to
hire the employee but to further a different economic interest,
neither of those public policies is furthered. (Popescu, at p. 62.)
Accordingly, the court held, no independent wrongful act needed
to be alleged to state a cause of action for interference with the
at-will contract.
Redfearn’s cause of action for interference with contract is
even further removed from the core situation presented by Reeves
than was the claim at issue in Popescu. The present action does
not involve an at-will employment agreement, and neither the
rights of at-will employees to pursue economic opportunities nor
the rights of employers to compete for talented workers are at
issue. The general rule that wrongful conduct apart from
interference with the contract itself need not be pleaded or proved
governs this case.
Trader Joe’s’ argument based on Reeves fails for two
additional reasons. First, Redfearn’s complaint does not allege
the Caliber contracts with Seneca and Sunsweet were terminable
at will, and the contracts’ at-will status is not reasonably
inferable from the facts pleaded. (See Evans v. City of Berkeley,
supra, 38 Cal.4th at p. 20.) Second, as discussed in the following
section of this opinion, even if an allegation of independently
wrongful conduct were necessary, Redfearn’s allegation that a
Trader Joe’s executive falsely accused him of unethical business
practices to induce Seneca and Sunsweet to terminate their
20
contracts with Caliber adequately pleaded an independently
actionable wrong.
3. Redfearn Has Adequately Stated Causes of Action for
Intentional and Negligent Interference with Prospective
Economic Advantage
a. The elements of the two causes of action
The elements of intentional interference with prospective
economic advantage are “(1) the existence, between the plaintiff
and some third party, of an economic relationship that contains
the probability of future economic benefit to the plaintiff; (2) the
defendant’s knowledge of the relationship; (3) intentionally
wrongful acts designed to disrupt the relationship; (4) actual
disruption of the relationship; and (5) economic harm proximately
caused by the defendant’s action.” (Roy Allan Slurry Seal, Inc. v.
American Asphalt South, Inc. (2017) 2 Cal.5th 505, 512; accord,
Crown Imports, LLC v. Superior Court (2014) 223 Cal. App. 4th
1395, 1404; see Korea Supply, supra, 29 Cal.4th at pp. 1158-1159
[interfering with the plaintiff’s economic relationship with a third
party is wrongful only if “the defendant engaged in an
independently wrongful act”].)
The elements of negligent interference with prospective
economic advantage are (1) the existence of an economic
relationship between the plaintiff and a third party containing
the probability of future economic benefit to the plaintiff; (2) the
defendant’s knowledge of the relationship; (3) the defendant’s
knowledge (actual or construed) that the relationship would be
disrupted if the defendant failed to act with reasonable care;
(4) the defendant’s failure to act with reasonable care; (5) actual
disruption of the relationship; (6) and economic harm proximately
caused by the defendant’s negligence. (Venhaus v. Shultz (2007)
21
155 Cal. App. 4th 1072, 1077-1078; North American Chemical Co.
v. Superior Court (1997) 59 Cal. App. 4th 764, 786.)
“The difference between intentional interference and
negligent interference with prospective economic advantage
relates to the defendant’s intent.” (Crown Imports, LLC v.
Superior Court, supra, 223 Cal.App.4th at p. 1404, fn. 10.)
Trader Joe’s’ demurrer did not challenge the sufficiency of
Redfearn’s allegations of intent with respect to either variant of
the interference with prospective economic advantage tort.
b. Redfearn adequately alleged an independently
wrongful act
A plaintiff alleging a claim for intentional or negligent
interference with prospective economic advantage has the burden
to plead and prove as an element not only that the defendant
interfered with an economic relationship, but also “that the
defendant’s interference was wrongful ‘by some measure beyond
the fact of the interference itself.’” (Della Penna v. Toyota Motor
Sales, U.S.A., Inc., supra, 11 Cal.4th at p. 393; accord, Korea
Supply, supra, 29 Cal.4th at p. 1159; Crown Imports, LLC v.
Superior Court, supra, 223 Cal.App.4th at pp. 1404-1405.) “‘[A]n
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’” (Edwards v. Arthur
Andersen LLP (2008) 44 Cal. 4th 937, 944), not merely the
product of an improper, but lawful, purpose or motive. (Korea
Supply, at p. 1159 & fn. 11; San Jose Construction, Inc. v.
S.B.C.C., Inc. (2007) 155 Cal. App. 4th 1528, 1545.) Such conduct
must also be independently actionable (Korea Supply, at
p. 1159; Popescu, supra, 1 Cal.App.5th at p. 63), meaning the
legal standards must “provide for, or give rise to, a sanction or
22
means of enforcement for a violation of the particular rule or
standard that allegedly makes the defendant’s conduct wrongful.”
(Stevenson Real Estate Services, Inc. v. CB Richard Ellis Real
Estate Services, Inc. (2006) 138 Cal. App. 4th 1215, 1223.)
The fact that the defendant’s conduct was independently
wrongful is an element of the interference cause of action itself.
(Crown Imports, LLC v. Superior Court, supra, 223 Cal.App.4th
at pp. 1404-1405; Bed, Bath & Beyond of La Jolla, Inc. v. La Jolla
Village Square Venture Partners (1997) 52 Cal.App.4th 867,881.)
In addition, the wrongful interfering act can be independently
tortious only as to a third party; it need not be independently
wrongful as to the plaintiff. (Korea Supply, supra, 29 Cal.4th at
p. 1163; Crown Imports, at p. 1405.) Accordingly, contrary to
Trader Joe’s’ argument on appeal, to state a cause of action for
intentional or negligent interference with prospective economic
advantage, it is not necessary to also plead a separate, stand-
alone tort cause of action. Here, within his causes of action for
interference with prospective economic advantage, Redfearn has
adequately alleged defamation as an independently wrongful act.
“The tort of defamation ‘involves (a) a publication that is
(b) false, (c) defamatory, and (d) unprivileged, and that (e) has a
natural tendency to injure or that causes special damage.’” (Taus
v. Loftus (2007) 40 Cal. 4th 683, 720.) The publication must be an
intentional publication of a statement of fact.
(J-M Manufacturing Co., Inc. v. Phillips & Cohen LLP (2016)
247 Cal. App. 4th 87, 97.) “The defamatory statement must
specifically refer to, or be “‘of and concerning,’” the plaintiff.”
(John Doe 2 v. Superior Court (2016) 1 Cal.App.5th 1300, 1312.)
The existence of a privilege is an affirmative defense that may be
raised by demurrer only if the facts alleged in the complaint
23
demonstrate the existence of a privilege. (Smith v.
Commonwealth Land Title Ins. Co. (1986) 177 Cal. App. 3d 625,
630; Green v. Cortez (1984) 151 Cal. App. 3d 1068, 1072; Pavlovsky
v. Board of Trade (1959) 171 Cal. App. 2d 110, 113; see generally
Holiday Matinee, Inc. v. Rambus, Inc. (2004) 118 Cal. App. 4th
1413, 1420 [“[a]lthough privilege is typically asserted as an
affirmative defense, it may be raised by general demurrer where
the existence of the privilege appears”].)
Redfearn alleged that in a meeting with a Seneca
representative Jon Basalone, a Trader Joe’s executive, falsely
accused Redfearn of spreading rumors that Trader Joe’s
employees were soliciting bribes and the only way to do business
with them was to pay the bribes demanded. He also alleged
similar false statements had been made in meetings with
Sunsweet. These allegedly false statements by a Trader Joe’s
executive, intended to induce Seneca and Sunsweet to terminate
their brokerage contracts with Caliber, charged Redfearn with
unethical behavior, false statements that would have a natural
tendency to injure him in his trade or business. (See Civ. Code,
§ 46, subd. 3 [defining slander to include a false oral
communication that “[t]ends directly to injure [a person] in
respect to his office, profession, trade or business . . .”]; Savage v.
Pacific Gas & Electric Co. (1993) 21 Cal. App. 4th 434, 445-446.)
“Subdivision 1 (crime) and 3 (occupation) of Civil Code section 46
‘have been held to include almost any language which, upon its
face, has a natural tendency to injure a person’s reputation,
either generally, or with respect to his occupation [citations]; and
words clearly conveying a meaning within one of the statutory
categories are actionable per se.’” (Regalia v. The Nethercutt
Collection (2009) 172 Cal. App. 4th 361, 368.) “Most of the cases
24
that fit within that category [Civil Code section 46,
subdivision (3)] involve statements that reflect on the integrity
and competence of the plaintiff, the clearest being allegations of
unethical activity or incompetence.” (Id. at p. 369; see 5 Witkin,
Summary of Cal. Law (11th ed. 2017) Torts, § 651, p. 892 [“an
attack on the honesty of an employee or business person
endangers his or her position, and is actionable per se”].)
Redfearn adequately pleaded all other necessary elements
of his causes of action for interference with prospective economic
advantage. The demurrer to these causes of action, as well as the
demurrer to the cause of action for intentional interference with
contract, should have been overruled.
DISPOSITION
The judgment of dismissal is reversed, and the matter
remanded to the trial court with directions to vacate its order
sustaining Trader Joe’s’ demurrer to the first amended complaint
without leave to amend and to enter a new order overruling the
demurrer to the causes of action for intentional interference with
contractual relations and intentional and negligent interference
with prospective economic advantage and confirming Redfearn’s
dismissal of the cause of action for unfair competition. Redfearn
is to recover his costs on appeal.
PERLUSS, P. J.
We concur:
ZELON, J. SEGAL, J.
25