Roy Allan Slurry Seal, Inc. v. Amer. Asphalt So., Inc.

Filed 2/20/15
CERTIFIED FOR PUBLICATION
IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA
SECOND APPELLATE DISTRICT
DIVISION EIGHT
ROY ALLAN SLURRY SEAL, INC., et B255558
al.,
(Riverside County Super.
Plaintiffs and Appellants. Ct. No. RIC1308832)
v.
AMERICAN ASPHALT SOUTH, INC.,
Defendant and Respondent,
APPEAL from a judgment of the Superior Court of Riverside County. Richard J.
Oberholzer, Judge. Affirmed in part, reversed in part and remanded with directions.
Doyle & Schafer, Daniel W. Doyle and David Klehm for Plaintiffs and
Appellants.
Atkinson, Andelson, Loya, Ruud & Romo, Scott K. Dauscher, Paul G. Szumiak
and Jennifer D. Cantrell, for Defendant and Respondent.
__________________________
INTRODUCTION
May the second-place bidder on a public works contract state a cause of action for
intentional interference with prospective economic advantage against the winning bidder
if the winner was only able to obtain lowest bidder status by illegally paying its workers
less than the prevailing wage? We hold that the answer is yes if the plaintiff alleges it
was the second lowest bidder and therefore would have otherwise been awarded the
contract, because that fact gives rise to a relationship with the public agency that made
plaintiff’s award of the contract reasonably probable.
FACTS AND PROCEDURAL HISTORY
Between 2009 and 2012 American Asphalt South, Inc. (American), outbid either
Roy Allan Slurry Seal, Inc. (Allan), or Doug Martin Contracting, Inc. (Martin), on
23 public works contracts totaling more than $14.6 million to apply a slurry seal
protective coating to various roadways throughout Los Angeles, San Bernardino,
Riverside, Orange, and San Diego Counties.1
Allan and Martin jointly sued American in those five counties for intentional
interference with prospective economic advantage and other torts, alleging that American
had only been able to submit the lowest bid by paying its workers less than the statutorily
required prevailing wage. (Lab. Code, §§ 1770, 1771 [contractors on public works
projects must pay the prevailing wage, as determined by the Department of Industrial
Relations].) Allan and Martin alleged that each was the second lowest bidder, as to,
respectively, 17 and 6 of the contracts and would have been awarded those contracts as
1 We have reached that figure by rounding the numbers alleged in the pleadings.
The public agencies that awarded the contracts were, as follows: in Los Angeles County
the cities of Pasadena, Claremont, and Downey; in San Bernardino County, the cities of
Fontana, Loma Linda, Colton, Rancho Cucamonga, and Twenty Nine Palms; in Riverside
County, the County of Riverside and the cities of Temecula, Murrieta, Menifee, and
Riverside; in Orange County, the cities of Rancho Santa Margarita and Newport Beach;
and in San Diego County, the cities of La Mesa and Coronado.
Appellants have asked us to take judicial notice of pleadings filed in other cases.
We deny that request.
2
the lowest bidder had American’s bid included labor costs based on the prevailing wage.2
Plaintiffs alleged that each contractor’s material costs were effectively the same and that
the only substantial difference in their bids came from American’s unlawfully deflated
labor costs. Plaintiffs also alleged a cause of action for predatory pricing under the
Unfair Practices Act (Bus. & Prof. Code, §§ 17000 et seq., 17043 (UPA)) and sought an
injunction to enjoin American’s bidding practices under the Unfair Competition Law.
(Bus. & Prof. Code, § 17200 (UCL).)
American demurred to the complaints, contending that plaintiffs did not have the
required existing relationship and reasonable probability of being awarded the contracts
that was required to show intentional interference with prospective economic advantage.
American also contended that the unfair practices and unfair competition claims were
defective on grounds we discuss in detail below.
These demurrers led to conflicting rulings from three trial courts. In July 2013,
the Los Angeles Superior Court overruled American’s demurrers to the intentional
interference with economic advantage and UCL claims, but sustained the demurrer as to
the UPA claim with leave to amend. On November 5, 2013, the Riverside Superior Court
sustained without leave to amend American’s entire demurrer. On November 15, 2013,
the San Diego Superior Court overruled American’s entire demurrer. Plaintiffs appealed
from the Riverside judgment in January 2014, and one week later our Supreme Court
ordered all five matters coordinated for trial in Los Angeles Superior Court and for
appellate purposes in the Second District Court of Appeal.
Plaintiffs contend that the Riverside trial court erred because their bid submissions
created the required economic relationship for the intentional interference with economic
advantage tort.
2 We will refer to Allan and Martin collectively as plaintiffs.
3
STANDARD OF REVIEW
In reviewing a judgment of dismissal after a demurrer is sustained without leave to
amend, we assume the truth of all facts properly pleaded by the plaintiff-appellant.
Regardless of the label attached to the cause of action, we examine the complaint’s
factual allegations to determine whether they state a cause of action on any available
legal theory. (Doe v. Doe 1 (2012) 208 Cal. App. 4th 1185, 1188.) We do not assume the
truth of contentions, deductions, or conclusions of law or fact and may disregard
allegations that are contrary to the law or to a fact that may be judicially noticed. (Ibid.)
To the extent issues of statutory construction are raised, we apply the rules of
statutory construction and exercise our independent judgment. Our first task in
construing a statute is to ascertain the Legislature’s intent in order to carry out the
purpose of the law. If the statutory language is clear and unambiguous, no judicial
construction is required. If the statute is ambiguous, the words must be construed in
context and in light of the statutory purpose. (Doe v. Doe 1, supra, 208 Cal.App.4th at
p. 1189.)
DISCUSSION
1. The Tort of Intentional Interference With Prospective Economic Advantage
The tort of intentional interference with prospective economic advantage
(intentional interference) provides a remedy to those “who suffer[] the loss of an
advantageous relationship” due to the actions of “a malicious interloper.” (Zimmerman v.
Bank of America (1961) 191 Cal. App. 2d 55, 57.) “[T]he mere fact that a prospective
economic relationship has not attained the dignity of a legally enforceable agreement
does not permit third parties to interfere with performance.” (Buckaloo v. Johnson
(1975) 14 Cal. 3d 815, 827 (Buckaloo), disapproved on other grounds in Della Penna v.
Toyota Motor Sales, U.S.A., Inc. (1995) 11 Cal. 4th 376, 393, fn. 5.) The tort is
considerably more inclusive than actions for interference with contract, and therefore
4
does not depend on the existence of a valid contract. (Korea Supply Co. v. Lockheed
Martin Corp. (2003) 29 Cal. 4th 1134, 1157 (Korea Supply).)
In order to state a cause of action for this tort, a plaintiff must allege five elements.
First, the existence of an economic relationship with some third party that makes it
reasonably probable the plaintiff will gain some future economic benefit. This protects
the expectation that the relationship will eventually produce the desired benefit, not the
speculative expectation that a potentially beneficial relationship will arise. (Korea
Supply, supra, 29 Cal.4th at p. 1164.)
Second, the defendant must have knowledge of the plaintiff’s economic
relationship. (Korea Supply, supra, 29 Cal.4th at p. 1164.)
Third, the defendant must have engaged in wrongful acts designed to disrupt the
plaintiff’s relationship. This requires allegations that the defendant engaged in an
independently unlawful act separate and apart from the acts of interference and that the
defendant either intended to interfere or acted with the knowledge that interference was
certain or substantially certain to occur. (Korea Supply, supra, 29 Cal.4th at pp. 1164-
1165.) This does not require that the plaintiff have been identified by name, however,
and it is enough that the defendant was aware its actions would frustrate the legitimate
expectations of a specific, albeit unnamed, party. (Ramona Manor Convalescent
Hospital v. Care Enterprises (1986) 177 Cal. App. 3d 1120, 1132-1133.)
Fourth, plaintiffs’ economic relationship was actually disrupted. (Korea Supply,
supra, 29 Cal.4th at p. 1165.)
Fifth, plaintiffs suffered economic harm that was proximately caused by
defendant’s interference. (Korea Supply, supra, 29 Cal.4th at p. 1165.)
2. Plaintiffs, as the Lawful And Second Lowest Bidders, Had a Reasonably Probable
Economic Expectancy that They Would be Awarded the Contracts
The competitive bidding laws for public works contracts are designed to protect
the public, not bidders. (See Konica Business Machines U.S.A., Inc. v. Regents of
University of California (1988) 206 Cal. App. 3d 449, 456; Universal By-Products, Inc. v.
5
City of Modesto (1974) 43 Cal. App. 3d 145, 152.) Therefore while public agencies are
generally expected to accept the bid of the lowest responsible bidder, they still have
discretion to reject all bids or accept one of multiple bids that have tied as the lowest.3
(Pub. Contract Code, §§ 10122, subd. (d), 20166, 22038, subd. (b).)
Based on appellate decisions applying this principle in various contexts, which we
discuss post, American contends that losing bidders are barred from suing their
successful competitors for intentional interference because there was no existing
relationship with which to interfere and no reasonable probability that any contract would
ever have been awarded.
No reported California decision has reached this issue. We turn for guidance to
two decisions of the California Supreme Court: Korea Supply, supra, 29 Cal. 4th 1134,
and Buckaloo, supra, 14 Cal. 3d 815. The Buckaloo court, which first articulated the
elements of the intentional interference tort, noted that the tort could be established by
showing interference with a contract “which is certain to be consummated.” (Buckaloo,
at p. 823, fn. 6, citing Builders Corporation of America v. United States (N.D. Cal. 1957)
148 F. Supp. 482, 484, fn. 1, rev’d. on other grounds (9th Cir. 1958) 259 F.2d 766.)
Drawing upon this principle, the Korea Supply court considered the pleading
requirements of an intentional interference cause of action brought by the agent of the
losing bidder on a contract to supply military radar equipment to the government of South
Korea. The agent alleged that the winning bidder obtained the contract by providing
bribes and sexual favors to key Korean officials, in violation of the federal Foreign
Corrupt Practices Act. (15 U.S.C. § 78dd-2.) The agent alleged that its principal’s
product was superior and its bid was significantly lower than defendant’s bid, that but for
defendant’s misconduct its principal would have been awarded the contract, and that as a
result the agent lost the commission it would have otherwise obtained.
3 A responsible bidder is one “who has demonstrated the attribute of
trustworthiness, as well as quality, fitness, capacity, and experience to satisfactorily
perform the public works contract.” (Pub. Contract Code, § 1103.)
6
The trial court sustained the defendant’s demurrer without leave to amend, but the
Court of Appeal reversed, in part because it concluded the plaintiff did not have to plead
and prove that the defendant acted with the specific intent to interfere with the plaintiff’s
business expectancy. Korea Supply dealt primarily with that issue, agreeing with the
Court of Appeal that specific intent to disrupt a plaintiff’s business expectancy was not an
element of the intentional interference tort. (Korea Supply, supra, 29 Cal.4th at pp. 1156-
1157.)
The Korea Supply court went on to discuss the elements of the intentional
interference tort and how they limit the class of potential plaintiffs. In regard to the
existence of an economic expectancy, the Korea Supply court held that one existed even
though the plaintiff agent did not allege that it had a contractual agreement with its
principal, and instead “merely alleged that it had an economic expectancy in that it was
acting as [the principal’s broker] and it expected a commission if the contract was
awarded . . . .” (Korea Supply, supra, 29 Cal.4th at p. 1157.) In regard to proximate
cause, the Korea Supply court recounted plaintiff’s allegations that its principal would
have been awarded the contract absent defendant’s misconduct, leading directly to
plaintiff’s lost commission. Those allegations were sufficient to establish proximate
cause. (Id. at pp. 1165-1166.)
Elsewhere in the decision, the Korea Supply court recognized that the plaintiff was
an indirect victim of the defendant’s alleged misconduct. (Korea Supply, supra,
29 Cal.4th at pp. 1162-1163.) This makes sense because in order to interfere with the
plaintiff-agent’s expectation of receiving a commission, the defendant had to first derail
acceptance of the principal’s superior bid. Essential to Korea Supply’s proximate cause
discussion, therefore, is the notion that the defendant intentionally interfered with the
losing bidder’s viable contractual expectancy.4
4 We recognize that Korea Supply did not directly reach this issue, but whether by
design or an intuitive leap of logic, it seems inescapable to us that the Korea Supply
plaintiff’s ability to show proximate cause rested on this notion.
7
We see little functional difference between the allegations concerning the
unsuccessful bidder in Korea Supply and those made by plaintiffs in this case. Plaintiffs
here alleged that as the second lowest bidders they would have been awarded the
contracts but for American’s interference. Implicit in this is the allegation that the
various public entities were required to award the contract to the lowest responsible
bidder and that plaintiffs satisfied all the requirements necessary to qualify for those
contracts.5 Although plaintiffs here did not submit the lowest bids, that was alleged to be
due solely to American’s violation of its statutory obligation to pay its workers the
prevailing wage. As in Korea Supply, absent that alleged misconduct it was plaintiffs
who in fact submitted the true and lawful lowest bids.
Citing Pacific Architects Collaborative v. State of California (1979)
100 Cal. App. 3d 110, 121-122 (Pacific Architects), Swinerton & Walberg Co. v. City of
Inglewood-L.A. County Civic Center Authority (1974) 40 Cal. App. 3d 98, 101
(Swinerton), Rubino v. Lolli (1970) 10 Cal. App. 3d 1059, 1062 (Rubino), and Charles L.
Harney, Inc. v. Durkee (1951) 107 Cal. App. 2d 570, 580 (Harney), American contends
that a disappointed bidder has no legally protectable expectancy interest in being awarded
a contract. We first summarize the four cases and then conclude they are inapplicable
here.
The plaintiff in Pacific Architects, supra, 100 Cal. App. 3d 110, sued the state to
recover its bid preparation costs and lost profits when it submitted the lowest bid, but the
state rejected all bids after discovering it had insufficient funds for the project. Based on
the state’s discretion to reject all bids, the appellate court affirmed a summary judgment
for the state, holding that government immunity protected it from tort liability and that
promissory estoppel was not available as a remedy either. (Id. at pp. 121-122, 124.)
The plaintiff in Rubino, supra, 10 Cal. App. 3d 1059, submitted the lowest bid on a
state project and sued the director of the agency after the contract was awarded to another
5 Plaintiffs allege, and American does not dispute, that the basic principle of public
contracting law applies here – if a contract is awarded, it must be awarded to the lowest
responsible bidder.
8
bidder. The Rubino court held that the ability to reject and award bids vested the director
with discretion, and that his abuse of that discretion qualified for government immunity
in a tort action for damages. (Id. at p. 1062.) Even so, the Rubino court noted that a
mandate action might have been available to restrain the agency from awarding the
contract if the agency abused its discretion. (Ibid., citing Baldwin-Lima-Hamilton Corp.
v. Superior Court (1962) 208 Cal. App. 2d 803, 824-826.)
The plaintiff in Swinerton, supra, 40 Cal. App. 3d 98, was the lowest bidder on a
project and sued the public agency in tort and for promissory estoppel when the contract
was awarded to someone else. Although Rubino’s government immunity principles
applied to the tort claim against the public agency (id. at pp. 101-102), promissory
estoppel was held available to compensate the plaintiff for its bid preparation costs. (Id.
at pp. 103-105.) In particular, the Swinerton court noted, despite the public agency’s
discretion to reject all bids, allowing recovery under a promissory estoppel theory was
important to prevent making the agency’s promise to award the contract to the lowest
bidder illusory and “render the whole competitive bidding process nugatory.” (Id. at
p. 104.) Significantly, the plaintiff was allowed to state a cause of action against the
winning bidder for conspiring with the agency to award it the contract. (Id. at p. 106.)
The plaintiff in Harney, supra, 107 Cal. App. 2d 570, was the lowest bidder on a
public works project, but its bid was nearly 18 percent over the agency’s initial estimate.
When the agency discovered that its calculations were wrong, it rejected all the bids and
then revised its estimate and took new bids. The plaintiff brought a mandate action
seeking to compel the agency to award it the contract, but the appellate court held that
bidders on public works contracts had no right to be awarded the contract where the
statute gave the agency discretion to reject all the bids. (Id. at p. 580.)
We believe these four decisions have no application here. Each in some measure
rests on government immunity principles arising from an agency’s discretion to reject or
accept bids. Two – Swinerton and Rubino – recognized that the lowest bidder in fact has
an enforceable right in mandate to stop a public agency from improperly awarding a
contract. Our Supreme Court later endorsed Swinerton’s promissory estoppel rationale.
9
(Kajima/Ray Wilson v. Los Angeles County Metropolitan Transportation Authority
(2000) 23 Cal. 4th 305, 314-317.) None of American’s authorities involved an intentional
interference claim brought by a losing bidder against the winning bidder, but Swinerton
did endorse a tort remedy on a conspiracy theory against the winning bidder.
Nor is this a case where the public agency exercised its discretion to reject all bids.
As alleged, the public agencies in fact awarded the 23 disputed contracts to the company
they were duped into believing was the lowest responsible bidder in each instance.
Furthermore, the bidder-versus-public agency decisions are based on the principle that
the public contracting laws are designed to protect the public. While that policy makes
sense in order to protect taxpayers from damage awards against a public agency on top of
the contract price that went to the successful bidder, its application in this context is far
from clear. This action seeks damages from only the winning bidder and therefore does
not call for protection of the public. And while taxpayers gain some financial benefit by
contracting with businesses that pay less than the statutorily required prevailing wage,
American does not contend, and we believe no court would hold, that such an advantage
is worthy of judicial protection.
Relying on Westside Center Associates v. Safeway Stores 23, Inc. (1996)
42 Cal. App. 4th 507 (Westside Center), American also contends plaintiff’s intentional
interference cause of action fails because it “must have interfered with a specific existing
relationship, not simply with the formation of one in the future.” (Id. at p. 525.) Implicit
in this contention is the notion that no economic expectancy exists until a bid is accepted.
We do not believe Westside Center is applicable here. The plaintiff in that case
was a shopping center owner. The anchor tenant was Safeway. Ownership of the center
was fragmented and the Safeway store property was owned by a separate trust. The
plaintiff sued Safeway for intentional interference, alleging that after Safeway closed its
store in the center, Safeway renewed its lease option for another five years with the intent
to drive down the price of the center as its store sat vacant and then buy it at a reduced
price.
10
Plaintiff alleged two types of interference: (1) with its attempt to purchase the
Safeway property from the trust; and (2) a theory of “interference with the market” based
on the claim that Safeway’s conduct interfered with plaintiff’s ability to negotiate with an
unidentified class of all potential buyers. It was the latter group of speculative,
unidentified potential tenants to whom the Westside Center court referred when holding
that a specific, existing relationship was required. (Westside Center, supra,
42 Cal.App.4th at pp. 523-527.) As for plaintiff’s failed negotiations with the trust, the
issues on appeal concerned the trial court’s findings that there was no evidence Safeway
intended to disrupt a known relationship and that plaintiff’s damages were speculative,
findings that the Court of Appeal affirmed. (Id. at pp. 529-530.)
We conclude that plaintiffs, as the alleged lawful lowest bidders, had a tangible
expectancy the contracts would be theirs, an expectation that was thwarted only by
American’s unlawful conduct. As Korea Supply suggests, a bidder on a government
contract who submits a superior bid and loses out only because a competitor manipulated
the bid selection process through illegal conduct has been the victim of actionable
intentional interference. This is consistent with the notion that the true lowest bidder may
bring a mandate action to compel the public agency to reverse its previous decision
improperly awarding a contract. Absent some enforceable right, such mandate actions
would not be possible.6
The dissent complains that we have employed a temporally backward analysis by
relying on American’s alleged wrongful conduct to create an existing economic
relationship where none otherwise exists. We cannot agree. Instead, we conclude that an
actionable economic expectancy arises once the public agency awards a contract to an
unlawful bidder, thereby signaling that the contract would have gone to the second lowest
qualifying bidder. We see no reason to cut off any legal effect from the winning bidder’s
misconduct simply because it precedes the completion of the bidding process. Assuming
6 Where, as alleged here, the misconduct was not discovered for some time, a
mandate action to halt the contract award was not feasible, leaving plaintiffs with no
other remedy.
11
that the timing had some legal significance, the defendant’s wrongful conduct persists
throughout the bidding process, well past the time when it is wrongly awarded the public
works contract. In short, by continuing its unlawful conduct after wrongly winning the
contract, the defendant interferes with an expectancy that would have otherwise
materialized.
We also observe that under Korea Supply, any subcontractors plaintiffs had lined
up would have at least as great an economic expectancy as did the plaintiff-agent in that
case. Under the dissent’s reasoning, however, our plaintiffs would not. As stated before,
Korea Supply implicitly rejects that result.
American contends that recognizing the intentional interference tort in this case is
bad public policy because it will open the floodgates to actions by disappointed bidders
and will lead to the release of a defendant’s confidential and proprietary trade
information through pretrial discovery. This argument was expressly rejected by the
court in Korea Supply when it said, “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.” (Korea Supply, supra, 29 Cal.4th at
p. 1163.) In any event, we limit our holding to losing bidders who can show they were
the actual and lawful lowest bidders on a public works project.7
7 As we discuss in Section 4, post, the Legislature provides for civil actions against
winning bidders of public works contracts obtained by violation of the laws requiring
them to furnish workers compensation and unemployment insurance. (Lab. Code,
§ 1750; Pub. Contract Code, §§ 19102, 20104.70.) This statutory scheme reflects a
legislative statement that private tort claims are reasonable tools in the protection of
employees’ rights. By implication, these statutes reject American’s floodgate argument.
We also observe that liability under those statutes extends to a far broader
category of potential plaintiffs – not just the second place bidder, but also various
subcontractors and other businesses that would have benefitted had the losing bidder
obtained the contract. Even with that breadth, there are no reported appellate cases that
discuss tort claims filed under those statutes. It may be that the requirement in those
provisions of a criminal conviction as prerequisite to suit places a statutory damper on
such claims.
12
We believe that sound policy reasons support our recognition that the intentional
interference tort applies here. The central purpose of the prevailing wage law is to
protect and benefit employees on public works projects. (Road Sprinkler Fitters Local
Union No. 669 v. G & G Fire Sprinklers, Inc. (2002) 102 Cal. App. 4th 765, 776.) It also:
serves to protect employees from substandard wages that might be paid by contractors
who recruit labor from distant cheap-labor areas; lets union contractors compete with
non-union contractors; benefits the public through the superior efficiency of well-paid
workers; and compensates private sector workers with higher wages to make up for the
absence of job security and employment benefits enjoyed by public employees. (Ibid.)
Even though violators who are caught may face civil penalties and assessments (Lab.
Code, § 1741), and may be sued by employees who did not receive the prevailing wage
(Road Sprinklers, supra, at p. 777), allowing actions like plaintiffs’ to proceed will
further promote these goals by adding an extra disincentive to discourage unscrupulous
contractors from violating the prevailing wage laws. It also provides an additional level
of scrutiny to bidding practices by unsuccessful bidders. Taxpayers are not at risk from
damage awards in such cases. Whether a plaintiff was in fact the second lowest bidder
and would have been awarded a contract had the winning bidder complied with the
prevailing wage law is a factual issue susceptible to standard civil discovery practices and
is amenable to proof at trial.8
Most important, a contrary decision would not be limited to actions against
contractors who obtain public agency contracts by violating the prevailing wage laws. If
we affirm, we would effectively hold that no losing bidder could ever sue a competitor
for interfering with the bidding process no matter how egregious the misconduct because
8 A defendant’s alleged failure to pay the prevailing wage is calculable because that
rate is established by the Department of Industrial Relations. (Lab. Code, § 1770.)
Whether a plaintiff was the second lowest bidder and whether the public agency would
have awarded a particular contract to that plaintiff can be established by conducting
discovery of the relevant officials involved in the bidding and contract award process.
13
no economic relationship exists until and unless its bid is accepted.9 It does not require
much imagination to envision a contractor who obtains a public works contract by
bribery, extortion, or familial connections. (See Korea Supply, supra, 29 Cal. 4th 1134,
1140 [bribes and sexual favors].) At bottom, the intentional interference tort was
designed to protect an economic expectancy that showed a reasonable probability of
coming into being. A bidder on a public agency contract who in fact submits the lawful
lowest bid has such an expectancy, and it should not be thwarted by a competitor’s illegal
conduct.10
3. Decisions from Other States Expressly or Implicitly Permit Losing Bidders to Sue
for Intentional Interference
American cites three decisions from other jurisdictions to support its contention
that an intentional interference cause of action is not allowed under these circumstances,
and urges us to follow those cases and to decline to extend the tort. Close examination of
those decisions undercuts American’s reliance on those cases.
The first is Powercorp Alaska, LLC v. Alaska Energy Auth. (Alaska 2013)
290 P.3d 1173 (Powercorp).) The plaintiff in Powercorp manufactured components used
to improve the operation of power generation plants. It sued a public agency that
9 Although we rule in the context of public agency contracts, we note that under
American’s reasoning there is even less chance of establishing an actionable economic
expectancy where bidding on private contracts is concerned. At least public agencies
must accept the lowest responsible bid, a factor that we find significant here, where
plaintiffs were in fact the responsible lowest bidders. Where private bidding is
concerned, restraints may not apply.
10 We asked the parties to provide supplemental briefs on the following issues:
(1) whether a losing bidder’s past history of successful bids to a public agency creates an
existing economic relationship; (2) if so, whether plaintiffs could allege that fact here;
and (3) if so, whether plaintiffs should be allowed to amend their pleadings accordingly.
Both parties essentially agree that a past history of successful bids, in and of itself, is
insufficient to create an existing economic relationship, and we agree. We do believe that
fact may be relevant in determining whether plaintiffs were “responsible bidders,” under
the public contracts statutes (Pub. Contract Code, § 1103), and also may be relevant to
the element of proximate causation.
14
awarded a contract to a competitor, along with a public agency employee who allegedly
disclosed trade secrets in order to assist the competitor in the bidding process. In
affirming summary judgment for the employee on a cause of action for intentional
interference, the Alaska Supreme Court noted that the submission of a bid entitles the
bidder to only fair and honest consideration and does not “provide any one bidder with a
contract expectancy superior to the rights of other bidders.” (Id. at p. 1187, fn. omitted.)
Based on this language, American contends that Powercorp supports its claim that
plaintiffs had no valid contract expectancy. However, in the next sentence the
Powercorp court holds: “In this case, Powercorp did not submit a bid; the bid-protest
hearing officer concluded that ‘Powercorp could have responded, substituting [the
preferred controller] for its own controller, but it chose not to because . . . it is not
interested in building systems using other controllers.’ Powercorp has not produced other
evidence to contradict the hearing officer’s conclusion. Powercorp has not shown that
but for [the defendant employee’s] interference, it expected to enter a contract with [the
public agency] from which it would derive economic benefits.” (Powercorp, supra,
290 P.3d at p. 1187.) We understand American’s reliance on the former passage, but the
latter casts some doubt on what part it played in the court’s holding. If, as the latter
quoted portion suggests, no expectancy arose because the plaintiff never actually bid on
the project, then arguably Powercorp can be read to endorse intentional interference
claims when a bid has been submitted.
Furthermore, Powercorp appears at odds with an earlier Alaska Supreme Court
decision: J & S Services, Inc. v. Tomter (Alaska 2006) 139 P.3d 544 (Tomter). The
plaintiff in Tomter was the unsuccessful bidder on a contract to lease an airplane to a state
firefighting agency. The plaintiff sued the agency and its director of aviation, alleging
that the director held a grudge against it and wrongfully steered the contract to a friend’s
company. Although the action was barred as to the state because an exclusive statutory
remedy existed, the Alaska Supreme Court held that an intentional interference cause of
action might be viable against the director for misconduct committed outside his official
15
capacity, and allowed the plaintiff leave to amend to flesh out his allegations of
wrongdoing. (Id. at pp. 551-552.)
The second decision cited by American is Cedroni Assocs. v. Tomblinson,
Harburn Assocs., Architects & Planners, Inc. (2012) 492 Mich. 40 (Cedroni). The
plaintiff in Cedroni was the lowest bidder on a school construction project. Plaintiff sued
the school district’s architect for intentional interference, contending that the architect
acted out of spite when it recommended the contract be awarded to another.
In affirming a summary judgment for the architect, the Michigan Supreme Court
held that the absence of a contractual expectancy arose from the same principles that
prevented a losing bidder from suing the public agency that awarded the bid to someone
else. (Cedroni, supra, 492 Mich. at pp. 46-47.) However, this holding was augmented
by additional factors: in its request for proposals, the school district expressly retained
authority to reject any or all bids, stated that it might not necessarily award the contract to
the lowest bidder, and made it clear that the architect would play a role in determining
whether a bidder was “responsible” under the applicable statutes. (Id. at pp. 48-50.) The
public agency also found that the plaintiff was not a responsible contractor. (Id. at p. 53.)
It was under these circumstances that the Cedroni court held the plaintiff’s status
as lowest bidder did not create a valid contractual expectancy for purposes of the
intentional interference cause of action. (Id. at pp. 52-54.) We find Cedroni
distinguishable because the only one of the Cedroni factors present here was the public
entities’ ability to reject all bids, a factor we believe was ameliorated once the public
entities here chose to accept what they believed were the lawful lowest bids.
Furthermore, one federal court applying Michigan law distinguished Cedroni in a case
where the defendant’s wrongful interference occurred after plaintiff’s bid had been
unveiled as the lowest one and the public agency had begun negotiations to finalize the
deal. (360 Constr. Co. v. Atsalis Bros. Painting Co. (E.D. Mich. 2012) 915 F. Supp. 2d
883, 900-901.) Another federal court applying Michigan law held that a valid business
expectancy arose when the plaintiff produced evidence that it had supplied the only
16
qualifying bid. (Maiberger v. City of Livonia (E.D. Mich. 2010) 724 F. Supp. 2d 759,
778.)
The third decision cited by American is Duty Free Ams., Inc. v. Estée Lauder Co.
(S.D. Fla. 2013) 946 F. Supp. 2d 1321 (Duty Free). The plaintiff in Duty Free, an operator
of duty-free stores in airports, sued one of its former suppliers for intentional interference
with the plaintiff’s bids to obtain additional airport retail outlets, alleging that the supplier
violated federal antitrust laws by making disparaging comments about plaintiff.
Applying Florida law, the Duty Free court held that the plaintiff failed to state a claim for
tortious interference based solely on its bids to obtain more retail space because the mere
fact of making a bid did not create a protectable business relationship. (Id. at pp. 1338-
1339.)
While American points to that portion of the Duty Free decision, it omits the rest
of the analysis, which noted that the plaintiff was not bidding with an entity that was
required to accept the lowest bid and that a protectable business relationship might exist
in those situations. (Duty Free, supra, 946 F.Supp.2d at p. 1339.) The plaintiff might
have also succeeded, the court noted, had it alleged additional facts indicating that the
relationship went beyond the bidding process into negotiations which likely would have
been completed. (Ibid.)
Not only do the three sister-state decisions cited by American either reject or at
least undercut its contentions, our research has turned up decisions from several
jurisdictions that either expressly or by implication allow the cause of action, and none
that expressly forbids it.
In Killian Construction Company v. Jack D. Ball & Associates (Mo.App. S.D.
1993) 865 S.W.2d 889, a Missouri appellate court held that the disappointed bidder on a
school construction project could state a claim for intentional interference against the
successful bidder and the school district’s architectural consultant, alleging that it had
been the lowest bidder but lost the contract due to certain misconduct by defendants.
Directly addressing whether a valid business expectancy existed under those
circumstances, the Killian court held that the losing bidder’s inability to establish a
17
binding contractual relationship with the public agency did not preclude the bidder from
showing a protectable business relationship based on its status as the lowest bidder.
“Based upon the facts in the petition, a business expectancy was shown. Under normal
circumstances it would be expected that a school district, in order to save $24,000, would
make its contract with plaintiff, and not [the other bidder]. Where a proper bid is made,
we cannot say as a matter of law that the lowest bidder by a substantial amount could not
have a valid business expectancy that it would receive the contract if awarded.” (Id. at
p. 892.)
In R. S. Noonan, Inc. v. School District of City of York (1960) 400 Pa. 391, the
Pennsylvania Supreme Court held that the losing bidder for a school construction project
could not bring what was essentially a taxpayer’s mandate action to compel the school
district to award it the contract. The plaintiff also sued the school district’s architect for
interfering with the bidding process. Albeit with no real discussion, the court held that
the architect’s actions were privileged, but added that the “allegation sounds in tort, for
which there is an adequate remedy at law.” (Id. at p. 396.)
In National R.R. Passenger v. Veolia Transportation Services (D.C.C. 2009)
592 F. Supp. 2d 86, Amtrak sued another rail company for interfering with its bid to
provide railway services in Florida. Applying District of Columbia law, the National
R.R. Passenger court held that Amtrak could state a cause of action for intentional
interference. On the issue of whether a valid business expectancy existed, the court held
that Amtrak succeeded by alleging it had a legitimate expectation of winning the contract
because it met the bid requirements, had highly qualified employees, had an opportunity
to acquire the Florida rail company as a new customer, and was the only other bidder.
(Id. at p. 98.)
Other courts have disallowed intentional interference claims by losing bidders, but
not because they were unable to establish a valid business expectancy. Instead, these
decisions turned on other pleading defects, at least suggesting that absent those defects
the claims would survive. (Technology for Energy Corp. v. Scandpower, A/S (6th Cir.
1989) 880 F.2d 875 [applying California law, held losing bidder on contract to supply
18
nuclear reactor technology failed to state cause of action for intentional interference
against competitor because allegations did not show proximate cause, namely that but for
misconduct it was reasonably probable the business expectancy would have
materialized]; Soderlund Bros. v. Carrier Corp. (1995) 278 Ill.App.3d 606 [summary
judgment for defendant bidder affirmed where evidence showed its conduct was
privileged]; Boyle Service v. Dewberry Design Group (Okla.Civ.App. Div.3 2001)
24 P.3d 878 [summary judgment for defendant project architect and engineer affirmed
where evidence showed they did not intend to interfere with prospective economic
advantage]; Bard Tree Co. v. City of Oak Ridge (Tenn. 2010) 326 S.W.3d 156 [summary
judgment granted for defendants who allegedly interfered in plaintiff’s tree trimming bid;
the plaintiff never submitted a valid bid].)
4. The Statutory Remedies for Certain Unsuccessful Bidders are not Exclusive
In 1991 the Legislature added two provisions to the Public Contract Code that
allowed the second lowest bidder on certain public works contracts to sue and seek
damages from a successful bidder who obtained the contract through violations of the
laws concerning workers compensation and unemployment insurance: Public Contract
Code sections 19102 and 20104.70. The statutes require criminal convictions as a
prerequisite to civil suit. (Stats. 1991, c. 906 (A.B. 1754), § 3.)
Public Contract Code sections 19102 and 20104.70 are identical. They provide:
“(a) (1) The second lowest bidder, and any person, firm, association, trust,
partnership, labor organization, corporation, or other legal entity which has, prior to the
letting of the bids on the public works project in question, entered into a contract with the
second lowest bidder, may bring an action in superior court if that entity suffers damages
as a result of the bid of the second lowest bidder not being accepted due to the successful
bidder’s violation, as evidenced by the conviction of the successful bidder thereof, of any
provision of Division 4 (commencing with Section 3200) of the Labor Code [workers
compensation laws] or of the Unemployment Insurance Code, or of both.”
19
Subdivision (c)(2) defines the second lowest bidder as “the second lowest qualified
bidder deemed responsive by the public agency awarding the contract for public work.”
American contends that these two statutes evince a comprehensive statutory
scheme whose omission of claims based on violations of the prevailing wage law shows
that the statutory remedies are exclusive and therefore bar plaintiffs’ intentional
interference claims. Plaintiffs contend that the legislative history of these provisions does
not show such intent. American counters that under the rules of statutory construction:
(1) the Legislature could have provided a remedy for prevailing wage violations but
chose not to do so, indicating its intent to preclude those claims; (2) the Legislature’s
creation of these statutory rights shows they were intended to be exclusive, thus barring
intentional interference claims that are perpetrated by means of other kinds of wrongful
conduct; and (3) the allowance of claims based on only two worker protection laws
shows an intent to exclude all others.11
After reviewing the legislative history, we have no doubt that the Legislature did
not intend to include prevailing wage violations as a basis for recovery under Public
Contract Code sections 19102 and 20104.70. An Assembly committee report prefaced its
analysis of the proposed legislation with the statement that “[e]xisting law requires the
payment of prevailing wages to workers employed by private contractors on public works
projects valued at $1,000 or more. When a public agency (awarding body) decides to
advertise a public works contract, it must obtain the applicable prevailing rates from the
Director of Industrial Relations (DIR), and include them in the advertisement of the bids
and the contract. Other mandatory requirements of successful bidders include workers
compensation coverage and unemployment insurance for workers. [¶] This bill would
11 The parties also cite, and the trial court relied on, Labor Code section 1750, which
is identical in all material respects to the two Public Contract Code sections with one
notable exception: Labor Code section 1750 applies to only a class of public works
projects that does not include street repairs. (Lab. Code, § 1750, subd. (b)(1) [applicable
to construction, repair, remodeling, and other similar tasks performed on public buildings
or structures].) It is therefore inapplicable here.
20
permit any . . . bidder for a public works contract to file a civil action against competitors
when it has suffered damages as a result of losing bids to competitors who knowingly
violate statutory requirements to provide unemployment insurance or workers’
compensation insurance to employees.” (Assem. Com. on Labor and Employment, Rep.
on Assem. Bill No. 1754 (1991-1992 Reg. Sess.) May 1, 1991, p. 1.)12
We observe that two bill analyses suggested that a new cause of action was being
created where none existed. One report described the proposed legislation as “creat[ing]
a statutory cause of action for damages.” (Sen. Com. on Judiciary, Rep. on Assem. Bill
No. 1754 (1991-1992 Reg. Sess.) Aug. 27, 1991, p. 3.) Another stated that second lowest
bidders currently had no recourse if they lost out on a contract award because a
competitor violated the workers compensation and unemployment insurance laws. (Cal.
Dept. of Employment Development, Enrolled Bill Rep. on Assem. Bill No. 1754 (1991-
1992 Reg. Sess.) Sept. 20, 1991, p. 2.) Nothing in the statutes or legislative history
suggests the law applies to interference claims based on prevailing wage violations.
Whatever heft those legislative history fragments might bring to American’s
appellate arguments is outweighed by the “new-right—exclusive remedy” rule of
statutory construction and its counterpart, the doctrine of “preexisting right—cumulative
remedies.” When a statute creates a right that did not exist at common law and provides
a comprehensive and detailed remedial scheme for its enforcement, the statutory remedy
generally is exclusive. (Rojo v. Kliger (1990) 52 Cal. 3d 65, 79.) When a statutory
remedy is provided for a preexisting common law right, however, the newer remedy is
considered cumulative, leaving the plaintiff free to elect the older remedy. (Ibid.)
12 The purpose of the bill was to fight the “underground economy” fostered by
businesses that did not pay their fair share of taxes (Assem. Com. on Labor and
Employment, Rep. on Assem. Bill No. 1754 (1991-1992 Reg. Sess.) May 1, 1991, p. 2),
and to help the Employment Development and Industrial Relations departments
investigate and instigate the prosecutions of employers who fail to provide their
employees workers compensation and unemployment insurance. (Cal. Dept. of
Employment Development, Enrolled Bill Rep. on Assem. Bill No. 1754 (1991-1992 Reg.
Sess.) Sept. 20, 1991, p. 2.)
21
Just because we hold that the second lowest bidder on a public works project can
state a cause of action for intentional interference against the successful bidder does not
mean we have created a new cause of action. “The concept that there are no causes of
action except those that have been recognized by precedent, assumed at some point in the
common law, was not accepted generally at early common law, nor is it accepted today.”
(Rosefield v. Rosefield (1963) 221 Cal. App. 2d 431, 435; see 5 Witkin, Summary of Cal.
Law (10th ed. 2005) Torts, § 19, p. 73.) A liability is created only by statute where the
liability is embodied in a statute and was “of a type which did not exist at common law.”
(Briano v. Rubio (1996) 46 Cal. App. 4th 1167, 1176, quoting Jackson v. Cedars-Sinai
Medical Center (1990) 220 Cal. App. 3d 1315, 1320, italics added.) If the liability would
exist in some form regardless of the statute, it is not a liability created by statute.
(Lehman v. Superior Court (2006) 145 Cal. App. 4th 109, 118-119.) As a result, because
the intentional interference tort predates the Public Contract Code remedies, those
remedies cannot be deemed exclusive unless there is some expression of legislative
exclusivity.13
We look to the legislative history and the rules of statutory construction to
determine whether the Legislature intended an exclusive remedy. (Imperial Merchant
Services, Inc. v. Hunt (2009) 47 Cal. 4th 381, 396-397 [distinguishing cases where intent
to create exclusive remedy rested only on an assumption to that effect, or an inference
drawn from rules of statutory construction].) Neither the statutes nor the legislative
history mentions, much less suggest, that an exclusive remedy was contemplated. At
best, the legislative history is ambiguous on this point.
Ultimately, we turn to the rule of statutory construction that abhors absurd, harsh,
or mischievous results. (Starbucks Corp. v. Superior Court (2008) 168 Cal. App. 4th
1436, 1449.) This case is about far more than allowing intentional interference claims
based on a winning bidder’s prevailing wage violations. If the statutory remedies are
exclusive, then they bar all intentional interference claims other than those arising from a
13 The tort of intentional interference with prospective economic advantage dates
back to at least Zimmerman v. Bank of America, supra, 191 Cal.App.2d at p. 57.)
22
winning bidder’s failure to provide workers compensation or unemployment insurance.
It is a well-established rule of statutory construction that the Legislature does not intend
to legislate contrary to existing public policy. (Meninga v. Raley’s, Inc. (1989)
216 Cal. App. 3d 79, 89-90.) We refuse to believe that the Legislature intended to
preclude common law causes of action by a second place bidder who lost because, as in
Korea Supply, supra, 29 Cal. 4th 1134, the winning bidder plied those in charge of the
bidding process with bribes and sexual favors or, as in this case, by not paying prevailing
wages.14
5. An Independent Wrongful Act Occurred at the Time of Bidding
American contends that its failure to pay the prevailing wage was not an
independently wrongful act for purposes of the intentional interference tort because its
duty to pay those wages did not accrue until work began, long after the bidding process
was over. American relies on Fanelli, Antuzzi, Bonacorsi Painting, Inc. v. Santa Clara
Unified School District (1983) 141 Cal. App. 3d 686, 691 (Fanelli) for this proposition.
In Fanelli, supra, the Division of Labor Standards Enforcement sued a painting
contractor and a school district for the contractor’s failure to pay the prevailing wage for
work done for the district. The painter cross-complained against the district for
indemnity, alleging that the district failed to notify the contractor of its prevailing wage
obligations at the time of bidding and by failing to post a wage notice at the jobsite. The
Court of Appeal affirmed a summary judgment for the district on the indemnity issue
because the district had complied with the advance notice requirements by making copies
of the prevailing wage information available at its office. As for the district’s failure to
post a notice at the jobsite, the Fanelli court held that the omission did not cause the
contractor to remain unaware of its prevailing wage obligations because the notice was to
14 What we draw from these provisions is legislative recognition that the rights of
lawful lowest bidders on public works contracts are worthy of protection when those
contracts are obtained due to the winning bidder’s violations of certain laws.
23
be posted at the jobsite, which could only occur after the bidding process ended.
(Fanelli, supra, 141 Cal.App.3d at p. 691.)
We fail to see how Fanelli applies here at all. The obligation to post prevailing
wage notices at a jobsite has nothing to do with a contractor’s obligation to submit a bid
based on the prevailing wage rates. That obligation exists at the time bids are submitted,
and American’s alleged failure to do so in order to obtain contracts under false pretenses
occurred at that point. (San Jose Construction, Inc. v. S.B.C.C., Inc. (2007)
155 Cal. App. 4th 1528, 1545 [“[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 . . . .”].)
6. American’s Conduct Was Not Privileged
American contends that its conduct amounted to no more than sharp elbow
competition among business competitors and was therefore privileged. However, the
competition privilege does not apply to unlawful or illegitimate means. (Saunders v.
Superior Court (1994) 27 Cal. App. 4th 832, 843.) Obtaining a public works contract by
intentionally violating the prevailing wage laws is clearly unlawful, thereby defeating the
privilege.
7. Duty, Standing, and Proximate Cause Issues
American also contends its demurrer was properly sustained because it had no
duty as to plaintiffs to comply with the prevailing wage laws, plaintiffs have no standing
to enforce those laws, and the proximate cause of the contracts being awarded to
American was the decisions reached by the various public entities, not any misconduct by
American.
These contentions merit little discussion. Plaintiffs do not seek to enforce the
prevailing wage laws; they seek to enforce their right to compete for public works
contracts free of unlawful manipulation by their competitors. The duty American
allegedly breached was the duty to not interfere with plaintiffs’ prospective economic
24
advantage by violating the prevailing wage laws in order to make it appear as if
American were the lowest bidder. Finally, if, as alleged, plaintiffs submitted the true
lowest bids and American was able to misrepresent itself as the lowest bidder by
violating the prevailing wage laws, then that misconduct was the proximate cause of the
public works contracts being awarded to American instead of plaintiffs. (Korea Supply,
supra, 29 Cal.4th at pp. 1165-1166.)
8. The Demurrer Was Properly Sustained as to the UCA Cause of Action
It is unlawful for a business to sell its goods and services below cost with the
intent of harming competition. (Bus. & Prof. Code, § 17043 [“It is unlawful for any
person engaged in business within this State to sell any article or product at less than the
cost thereof to such vendor, or to give away any article or product, for the purpose of
injuring competitors or destroying competition.”]; § 17024 includes “article or product”
to include service].) Here, plaintiffs allege American engaged in predatory pricing by
providing its repaving and road repair services below cost. American demurred to the
cause of action on the grounds that its alleged failure to pay the prevailing wage did not
result in predatory pricing because its lower wages also lowered its costs.
Plaintiffs’ cause of action for predatory pricing misses the mark. Plaintiffs alleged
that American could underbid them because American did not pay its employees the
prevailing wage. The logic of plaintiffs’ complaint was not that American provided its
service below cost, but that American unlawfully reduced its costs by not paying the
prevailing wage, and by doing so could underbid plaintiffs. Selling below cost is
predatory pricing, but lowering one’s costs is not. (Bus. & Prof. Code, § 17043 [“It is
unlawful for any person engaged in business within this State to sell any article or
product at less than the cost thereof . . . .”].) On the other hand, to the extent plaintiffs’
allegation was that American was incurring and paying other costs, such as workers’
compensation and health and pension benefits, which its underbid did not recover – and
thus by implication American was selling its services below cost – the allegation lacks
the required specificity. (Fisherman’s Wharf Bay Cruise Corp. v. Superior Court (2003)
25
114 Cal. App. 4th 309, 322 [“To satisfy the requirements of section 17043, a plaintiff must
allege, in other than conclusionary terms, the defendant’s sales price, costs in the product,
and cost of doing business.”]; G.H.I.I. v. MTS, Inc. (1983) 147 Cal. App. 3d 256, 275 [“to
satisfy the pleading requirements of section 17043, the plaintiff must allege defendant’s
sales price, its cost in the product and its cost of doing business. [Citation.] And the
various costs must be stated in other than conclusionary terms.”]
9. The Demurrer Was Properly Sustained as to the UCL Cause of Action
Plaintiffs seek injunctive relief ordering American not to violate the prevailing
wage law. Plaintiffs pray for a “A temporary restraining order, a preliminary injunction,
and a permanent injunction, all enjoining defendants from submitting illegally deflated
bids for ‘public works’ projects based on defendant’s lowered labor costs achieved by
failing to pay its employees the ‘prevailing wage’ rate on any and all bids for ‘public
works’ contracts which Plaintiffs also submit bids on.” A third party has standing to sue
a contractor for declaratory and injunctive relief ordering payment of the prevailing
wage. (Monterey/Santa Cruz County etc, v. Cypress Marina Heights LP (2011)
191 Cal. App. 4th 1500, 1521 [“Local and union contractors had a beneficial interest in the
enforcement of the prevailing wage requirement because it was intended to benefit
them.”]; see also Vasquez v. State of California (2008) 45 Cal. 4th 243, 248-249, 260
[court awarded private attorney general fees to union official pursuing taxpayer action
against the state arising from stipulated injunction to ensure payment of prevailing wage
to state prisoners].)
American demurred on the grounds that plaintiffs failed to allege, and cannot
allege if permitted leave to amend, that plaintiffs would suffer immediate and irreparable
harm unless enjoined. Plaintiffs do not address the requirement to show irreparable harm
required for injunctive relief. Accordingly, we find no error by the trial court in
sustaining American’s demurrer to that cause of action.
26
DISPOSITION
The judgment dismissing plaintiffs’ complaint is reversed. The trial court is
directed to enter a new order overruling American’s demurrer to plaintiffs’ cause of
action for intentional interference with prospective economic advantage, and to sustain
the demurrers as to the causes of action for predatory pricing under Unfair Practices Act
and for an injunction under the Unfair Competition Law. Plaintiffs shall recover their
costs on appeal.
RUBIN, ACTING P. J.
I CONCUR:
FLIER, J.
27
B255558
Roy Allan Slurry Seal, Inc., et al. v. American Asphalt South, Inc.
GRIMES, J. – Concurring in part and dissenting in part.
I concur with the conclusion the trial court properly sustained the demurrer to the
second and third causes of action without leave to amend. I dissent from the conclusion
that plaintiffs have alleged a cause of action for intentional interference with prospective
economic advantage.
To state a claim for intentional interference with prospective economic advantage,
a plaintiff must allege, along with four other elements, “the existence of an economic
relationship with some third party that contains the probability of future economic benefit
to the plaintiff.” (Korea Supply Company v. Lockheed Martin Corp. (2003) 29 Cal. 4th
1134, 1164 (Korea Supply).) The principal question presented in this appeal is whether
the plaintiffs, who are bidders on public contracts, have alleged this threshold element of
the tort in their lawsuits against the bidder who won the contracts.
In my view, plaintiffs have not alleged and cannot allege the “existence of an
economic relationship” with the public entities that solicited bids for public works
contracts. Consequently, plaintiffs cannot satisfy the necessary elements of a cause of
action against the winning bidder for interference with prospective economic advantage.
The Supreme Court has enunciated the elements of the tort of intentional
interference with prospective economic advantage many times. Korea Supply is the
Supreme Court’s most recent opinion analyzing the tort. The court described the first
element of the tort this way: “First, a plaintiff . . . 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 desired benefit, not necessarily the more speculative
expectation that a potentially beneficial relationship will arise.’ [Citation.] . . . 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.” (Korea Supply, supra, 29
Cal.4th at p. 1164.)
1
The other four elements are these: “Second, a defendant must have knowledge of
the plaintiff’s economic relationship. . . . [¶] Third, the defendant must have engaged in
intentionally wrongful acts designed to disrupt the plaintiff’s relationship. [T]his 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. . . .
[¶] . . . Fourth, only plaintiffs that can demonstrate actual disruption of their economic
relationship will be able to state a claim for this tort. . . . [¶] Fifth, a plaintiff must
establish proximate causation,” showing “that the economic harm it suffered was
proximately caused by the acts of the defendant.” (Korea Supply, supra, 29 Cal.4th at
pp. 1164-1165.)
This case concerns only the first element of the tort: whether plaintiffs have
alleged “an economic relationship with a probable future economic benefit . . . .” (Korea
Supply, supra, 29 Cal.4th at p. 1164.) Otherwise stated, did plaintiffs, as bidders on
public works projects, have the requisite “economic relationship with a probable future
economic benefit” with the public entities that solicited the bids?
In my view, the question virtually answers itself, and the answer is “no.” Indeed,
in the context of public works contracts, it is not possible for such a relationship to exist
between the bidder and the public entity soliciting bids because public contract law
forbids it. Even if one could say that the relationship between bidders and the public
entity soliciting bids is an “existing economic relationship” (and I think that is not so),
certainly that relationship cannot, as a matter of law, “contain[] the probability of future
economic benefit” to the bidder. It is antithetical to the principles of competitive bidding
on public works projects that any bidder may expect probable future economic benefit –
none of the bidders has a “probability” of future economic benefit from the contract on
which it is bidding.
This is, of course, a case of first impression, in that there is no California authority
holding that a bidder on a public works contract cannot allege a claim for interference
with prospective economic advantage against the winning bidder. But the authorities
2
plaintiffs cite do not support their position, and the authorities that exist, by analogy,
support my conclusion that a bidder on a public works project has no economic
relationship with the public entity that contains the probability of future benefit.
I begin with Korea Supply, the case upon which plaintiffs principally rely. As
plaintiffs say, they “put their legal eggs in the Korea Supply basket.” But Korea Supply
in no way supports the proposition that a bidder on a public contract has an economic
relationship with the entity soliciting bids.
Korea Supply, of course, did arise in a bidding context. The plaintiff, however,
was not a manufacturer of the product that was the object of the bid and did not submit a
bid. Plaintiff claimed that the defendant winning bidder (Lockheed Martin) induced the
Republic of Korea to award a military equipment contract to it, rather than to a competing
bidder (MacDonald Dettwiler), by offering bribes and sexual favors to Korean officials,
and the contract was awarded to Lockheed Martin despite MacDonald Dettwiler’s
significantly lower bid and superior equipment. I repeat, the plaintiff was not, as here,
the losing bidder. The plaintiff was the broker for the losing bidder. Plaintiff represented
MacDonald Dettwiler in its bid and expected to receive a $30 million commission from
MacDonald Dettwiler if the bid were successful.
In short, the plaintiff broker in Korea Supply clearly had an “economic
relationship with some third party [MacDonald Dettwiler, the losing bidder] that
contain[ed] the probability of future economic benefit” to the plaintiff broker. As Korea
Supply stated: “Here, [the plaintiff broker] had an agency relationship with MacDonald
Dettwiler under which [the broker’s] commission was fixed at 15 percent of the contract
price. As alleged in the complaint, if MacDonald Dettwiler had been awarded the
contract, [the broker’s] commission would have exceeded $30 million. This business
relationship and corresponding expectancy is sufficient to meet this first element.”
(Korea Supply, 29 Cal.4th at p. 1164.)
Nothing in Korea Supply suggests in any way, shape or form that a losing bidder
could sue a winning bidder for interference with prospective economic advantage merely
on the basis of allegations the defendant engaged in wrongful acts to obtain the contract.
3
Nothing in Korea Supply in any way dilutes the requirement to allege facts showing the
first element of the tort: an economic relationship with a third party that contains the
probability of future economic benefit. Such an economic relationship existed between
the broker and the losing bidder in Korea Supply (to the tune of an expected $30 million),
but nothing in Korea Supply suggests that in this case such a relationship existed between
the losing bidders (plaintiffs) and the public entities who awarded the contracts.
Indeed, the first element of the tort was never at issue in Korea Supply, which
addressed an entirely different question: whether the third element of the tort –
intentionally wrongful acts designed to disrupt the plaintiff’s existing economic
relationship – requires a plaintiff to allege the defendant acted with the specific intent to
interfere with the plaintiff’s business expectancy. As noted already, Korea Supply held
the plaintiff need not do so, and that “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.”
(Korea Supply, supra, 29 Cal.4th at p. 1153.) This patently has nothing to do with the
need to plead and prove the plaintiff’s business expectancy in the first place.
Likewise, the other case on which plaintiffs rely has nothing to do with whether or
not the plaintiff had an existing economic relationship with the probability of future
benefit. In Settimo Associates v. Environ Systems, Inc. (1993) 14 Cal. App. 4th 842, the
plaintiff bidder on two contracts sued the bidder who won the contracts, claiming the
defendant was not properly licensed to perform some of the work called for by the
contracts (which were fully performed). (Id. at p. 844 & fn. 2.) The court did not address
the first element of the tort, simply holding that the lack of a license when the contracts
were awarded “does not amount to actionable unlawful interference with contracts.” (Id.
at p. 846.) The contracts were not public works contracts, and the court observed there
was no statutory authority “requiring a private entity to accept bids only from duly
licensed contractors.” (Ibid.) Settimo also observed that statutory licensing regulations in
the Business and Professions Code “neither create[] nor den[y] any civil remedy to
bidders who lose projects to unlicensed competitors,” and that even though the
defendant’s conduct “amounted to a misdemeanor and foreclosed any possibility of its
4
suing to enforce an awarded contract,” sanctioning such misconduct fell to the
Contractors’ Licensing Board, and the statutory licensing regulations “do not create any
action for civil damages in a competing bidder.” (Settimo, supra, at p. 846.)
In their briefs and in oral argument, plaintiffs consistently have said their
argument rests on Korea Supply, which provides no support. This case is the first time a
California court has held that a losing bidder may sue a winning bidder for interference
with prospective economic advantage merely on the basis of allegations the defendant
engaged in wrongful acts to obtain a public works contract. Like every case of first
impression, there is no precedent directly on point. But the case law that developed the
elements of this tort does not support the majority’s theory. I turn now to the other
authorities that have some pertinence, and find they lend support to my conclusion that,
in the context of public contracting, there can be no economic relationship between a
bidder and the public entity seeking bids.
In Blank v. Kirwan (1985) 39 Cal. 3d 311, the plaintiff and one of the defendants
both applied for a poker club license in the City of Bell. The city council approved
defendant’s application, and denied plaintiff’s application. Plaintiff sued, alleging a
conspiracy among various private individuals and city officials to legalize and
monopolize the operation of poker clubs. The plaintiff alleged that “but for defendants’
acts he would have made some undetermined profit operating a poker club in the City of
Bell,” and argued these allegations stated a cause of action for intentional interference
with prospective economic advantage. (Id. at pp. 329-330.)
The Supreme Court held the plaintiff’s complaint did not state a cause of action
“because the first element of the tort is lacking.” (Blank v. Kirwan, supra, 39 Cal.3d at
p. 330.) “First, ‘[the] relationship between [plaintiff] and the City cannot be
characterized as an economic relationship. It was [plaintiff’s] relationship to a class of as
yet unknown [patrons] which was the prospective business relationship.’ [Citation.]”
(Ibid.) Even if the relationship between the plaintiff and the city could be characterized
as an economic relationship, the court said, “it would make little difference. The tort has
traditionally protected the expectancies involved in ordinary commercial dealings – not
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the ‘expectancies,’ whatever they may be, involved in the governmental licensing
process.” (Id. at p. 330.) Further, the city council’s discretion to grant or deny a poker
club license application was “so broad as to negate the existence of the requisite
‘expectancy’ as a matter of law. Thus, ‘no facts are alleged . . . showing that the plaintiff
had any reasonable expectation of economic advantage which would otherwise have
accrued to him . . . .’ [Citation.]” (Ibid.)
Cases in other jurisdictions have held that a bidder on a public contract has no
valid business expectancy for purposes of a tortious interference claim.
In Cedroni Associates, Inc. v. Tomblinson, Harburn Associates, Architects &
Planners, Inc. (2012) 492 Mich. 40 (Cedroni Associates), the Michigan Supreme Court,
in a summary disposition case, held that the disappointed lowest bidder on a public
contract does not have a valid business expectancy for the purpose of sustaining a claim
of tortious interference with a business expectancy. (Id. at p. 43.) In Cedroni Associates,
a school district, on the advice of the defendant firm that was assisting the district with
the bid selection process, awarded a project to a contractor who submitted the second
lowest bid. The lowest bidder sued the defendant for tortious interference with a business
expectancy.
The court held the plaintiff had no reasonable expectation of being awarded the
contract. (Cedroni Associates, supra, 492 Mich. at p. 45.) Under Michigan law, the
court explained, the lowest bidder on a public contract cannot bring a cause of action
against the municipality when its bid is rejected, even when the municipality is required
to accept the lowest responsible bidder. (Id. at p. 46.) Given that rule, the court said, “it
is difficult to fathom how plaintiff’s submission of the lowest bid could have created a
valid business expectancy in light of the highly discretionary process of awarding
governmental contracts. In terms of whether a valid business expectancy is created, a
plaintiff's expectations are entirely the same regardless of whether it alleges that the
government has wrongfully denied it the contract or, as here, that a third party has
interfered and caused a denial of the contract.” (Id. at pp. 46-47, italics and boldface
added.) The court further observed that, by statute, the public entity could reject any or
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all bids, and “ ‘when the ultimate decision to enter into a business relationship is, by
statute, a highly discretionary decision, a plaintiff cannot establish that its “business
expectancy” [reflected] a reasonable likelihood or possibility and not merely wishful
thinking.’ [Citation.]” (Id. at p. 47.)
In light of these principles, “a bidder on a school construction project should know
that its submission of the lowest bid does not create a reasonable probability that the
school district will award it the contract.” (Cedroni Associates, supra, 492 Mich. at
p. 47.)
Other states have reached similar conclusions.
In Powercorp Alaska, LLC v. Alaska Energy Authority (Alaska 2012) 290 P.3d
1173 (Powercorp), the plaintiff and one of the defendants both developed and
manufactured “switchgear” systems used to improve the operation of power-generation
facilities, and both companies “have tried to secure and sometimes have secured,
contracts with the [public agency] to install switchgear . . . .” (Id. at p. 1176.) A key
component of these systems was a “controller,” and the two companies used different
technologies for this key component. (Ibid.) The facts of the case are complex and were
disputed, but the plaintiff eventually sued the public agency that awarded the contract to
its competitor, as well as one of the agency’s employees, the competitor, and others. (Id.
at p. 1180.)
The plaintiff alleged, against the agency’s employee, a claim for intentional
interference with prospective economic advantage and misappropriation of a trade secret.
(Powercorp, supra, 290 P.3d at p. 1181.) Powercorp upheld the trial court’s dismissal of
the intentional interference claim, saying this: “[The plaintiff’s] intentional interference
claim is premised on the notion that [the plaintiff] has an existing prospective business
relationship with the [agency], but it has not met this threshold requirement. Procurement
laws entitle [the plaintiff] to a fair bidding process in which no particular contractor is
favored from the outset. Submitting a bid entitles the bidder to ‘fair and honest
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consideration.’ Submitting a bid does not provide any one bidder with a contract
expectancy superior to the rights of other bidders.”1 (Id. at pp. 1186-1187, fn. omitted.)
In Duty Free Americas, Inc. v. The Estée Lauder Companies, Inc. (S.D. Fla. 2013)
946 F. Supp. 2d 1321 (Duty Free), the plaintiff was an operator of duty-free stores in
airports, and sued one of its former suppliers for intentional interference with the
plaintiff’s bids to obtain additional airport retail outlets. The court, applying Florida law,
dismissed the complaint because it “fail[ed] to plausibly allege that a business
relationship existed between it and the Newark, Boston, and Orlando airports . . . .” The
court dismissed the complaint without prejudice, but observed that “it seems unlikely [the
plaintiff] will be able to sufficiently plead the existence of a protected business
relationship . . . .” (Id. at p. 1338.)
The court explained that “a bidder generally cannot establish a protected business
relationship with an entity soliciting bids through a competitive bidding process,”
because a solicitation for bids is “merely a request for offers from interested parties,” and
because “a solicitation for bids encourages parties besides a plaintiff bidder to submit
offers in response,” so “the bidding process itself cannot serve as evidence that the
solicitor probably would have entered into a contract with the plaintiff but for the
defendant’s interference.” (Duty Free, supra, 946 F.Supp.2d at pp. 1338-1339.)
Consequently, “to establish a protected business relationship within a bidding process, a
plaintiff must allege additional facts indicating that the relationship went beyond the
bidding process and into negotiations which in all probability would have been
1 The court went on to say that the plaintiff did not submit a bid. The plaintiff chose
not to do so because it understood the request for proposals to require using a key
component (the controller) other than its own, and it had no intention of building systems
using other controllers, so chose not to bid. The court then concluded: “[The plaintiff]
has not shown that but for [the employee’s] interference, it expected to enter a contract
with the [agency] from which it would derive economic benefits.” (Powercorp, supra,
290 P.3d at p. 1187.) This conclusion, it seems to me, refers to the fifth element of the
tort, proximate causation (Korea Supply, supra, 29 Cal.4th at p. 1165), and in no way
undermines Powercorp’s previously stated holding that submitting a bid does not provide
any bidder with the threshold requirement of “an existing prospective business
relationship.” (Powercorp, at pp. 1186-1187.)
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completed.” (Id. at p. 1339.) The court went on to describe additional reasons for
finding no protectable relationship, including that there was no allegation the airports had
to accept the lowest bid for duty-free concessions, but concluded by reiterating that
“participating in this competitive bidding process does not establish a protected business
relationship.” (Ibid.)
The majority cites various points to distinguish these cases, and of course there are
distinctions. But I do not think those distinctions make a difference, or detract from the
fundamental threshold point each case makes. Notably, plaintiffs do not even attempt to
distinguish these cases. Instead, plaintiffs merely say, without citation, that “cases . . .
referring to ‘disappointed bidders’ are factually inapposite” because they do not contain
allegations of “ ‘independently wrongful conduct’ ” by the defendant toward the
plaintiffs. This assertion illustrates in sharp relief a fundamental misunderstanding of the
elements of an intentional interference claim.
California does indeed require, unlike other jurisdictions, independently wrongful
conduct. But, as I noted above, that requirement is part of the third necessary element of
the tort: intentionally wrongful acts designed to disrupt the plaintiff’s relationship. The
Supreme Court made plain in Korea Supply this requirement is part of the third element
of the tort.2 That has nothing to do with the need to plead and prove the first element of
the tort: an economic relationship with probable economic benefit that necessarily must
pre-exist the defendant’s wrongful conduct interfering with it.
That the economic relationship containing the probability of future benefit must
precede, or exist separately from, the defendant’s interference seems obvious, and is
apparent in the cases. In Korea Supply, the plaintiff had an agency relationship with a
2 “[Lockheed Martin] 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. . . . [¶]
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.” (Korea Supply, supra, 29 Cal.4th at p. 1155.)
9
bidder that would have given him a $30 million commission if the bidder had won the
contract. (29 Cal.4th at p. 1164.) That economic relationship existed entirely apart from
and before the defendant’s illegal conduct that disrupted that relationship. The same is
true in Buckaloo v. Johnson (1975) 14 Cal. 3d 815, 827, where a real estate broker, in
response to a seller’s open listing of her property with the intention that responding
brokers would be paid a commission, procured a buyer who, with knowledge of the
promised commission, induced the seller to make a sale agreement leaving the broker
uncompensated. (Id. at p. 829.) The broker’s “expectancy” existed without regard to the
defendant’s subsequent conduct.
Again, and always, the plaintiff’s “expectancy” must necessarily precede the
interfering conduct. Sole Energy Company v. Petrominerals Corporation (2005) 128
Cal. App. 4th 212, 243, makes this plain. (That case did not involve bidding on a public
contract.) In that case, the plaintiffs contended one of the defendants (Silverman)
tortiously interfered in a transaction by which one corporation was to acquire the stock
and assets of another (HBOC). (Id. at pp. 241, 243.) The court found the plaintiffs failed
to produce evidence Silverman interfered with an existing economic relationship.
Silverman made misrepresentations about another defendant’s (Petrominerals) inability to
purchase and lack of interest in acquiring HBOC. (Id. at pp. 218, 243.) But Silverman’s
allegedly wrongful conduct occurred before the plaintiffs’ economic relationship with the
third party (HBOC and others) arose: “As of [the date of Silverman’s
misrepresentations], none of the Plaintiffs in this case had an existing economic
relationship with HBOC [and the others], much less an existing relationship containing
the probability of a future economic benefit. Discussions about the possibility of
purchasing HBOC’s stock had just begun in earnest. The letter of intent – which
Plaintiffs contend was the basis for their interference with economic relationship cause of
action – would not be written until three months later.” (Id. at p. 243.) The court also
found the misrepresentations were made to induce the plaintiffs into seeking an economic
relationship with HBOC and the others, not to disrupt it. (Ibid.)
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Thus it is plain that the “economic relationship . . . that contains the probability of
future economic benefit to the plaintiffs” is a threshold element, and cannot depend for its
existence on whether or not defendant acts wrongfully. The threshold question to ask is,
did plaintiffs have an existing economic relationship with the public entity soliciting bids
for a public project containing the probability of future economic benefit? – without
regard to defendant’s allegedly illegal conduct. In other words, plaintiffs must have a
prospective economic advantage or expectancy with which a defendant might then
interfere or disrupt. But no such expectancy exists among bidders for a public works
contract.
Westside Center Associates v. Safeway Stores 23, Inc. (1996) 42 Cal. App. 4th 507
put the point very well: “These two decisions, Blank [v. Kirwan, supra] and Youst [v.
Longo (1987) 43 Cal. 3d 64], support the view that the interference tort applies to
interference with existing noncontractual relations which hold the promise of future
economic advantage. In other words, it protects the expectation that the relationship
eventually will yield the desired benefit, not necessarily the more speculative expectation
that a potentially beneficial relationship will eventually arise.” (Id. at p. 524.) Westside
Center examined many cases in connection with the claim before it, which was that
liability could be imposed for interfering with prospective relationships with “as yet
unidentified” third parties. (Id. at p. 520.) Examining various cases, the court agreed
with the view that “a defendant’s tortious conduct must have interfered with a specific
existing relationship, not simply with the formation of one in the future” (id. at p. 525),
and found that view gained additional support from the usual formulation of the elements
of the tort itself: “These requirements presuppose the relationship existed at the time of
the defendant’s allegedly tortious acts lest liability be imposed for actually and
intentionally disrupting a relationship which has yet to arise.” (Id. at p. 526.)
In short, plaintiffs, and the majority, have conflated two different elements of the
tort. Plaintiffs allege an existing relationship arose with the public entity, containing a
probability of future economic benefit, solely by virtue of having submitted a bid. And
the majority holds that the second lowest bidder, who would otherwise have been
11
awarded the contract, can state a cause of action against the winning bidder if the winning
bidder obtained lowest bidder status only by illegally paying its workers less than the
prevailing wage. Both these theories effectively rewrite the first element of the cause of
action for interference with prospective economic advantage – “an economic relationship
with a probable future economic benefit” – by wiping out the predicate “relationship”
language.
Under plaintiffs’ theory, anyone who submits a bid has a legitimate expectation of
winning the contract – an expectation that arose at the moment of submitting a bid, even
though it cannot be determined until after all the bids have been unsealed which bidder is
the second lowest bidder. And under the majority’s theory, the second lowest bidder has
that legitimate expectation, if it turns out that the winning bidder engaged in illegal
conduct. Both these theories would create a new tort for the benefit of parties who had
no relationship with the public entity whatever before submitting a bid. This is a
departure without logical reason from all the cases limiting the tort to “ ‘interference with
an existing contract or a contract which is certain to be consummated.’ ” (Buckaloo,
supra, 14 Cal.3d at p. 823, fn. 6; see id. at pp. 826-827.)
The only reason plaintiffs offer for reinventing the tort of interference with
prospective economic advantage was the assertion in oral argument that “the best way to
prevent wage theft” is to expand the tort as plaintiffs propose. And the majority likewise
maintains that sound policy reasons, and particularly the prevailing wage law, support its
conclusion. But the tort of interference with prospective economic advantage was not
developed to prevent wage theft; it was developed to protect relationships that give rise to
expectancies in commercial dealings, not the “expectancies,” whatever they may be, of a
bidder for a public contract. (See Blank v. Kirwan, supra, 39 Cal.3d at p. 330.)
Moreover, the public works process is not intended to prevent wage theft. It is
intended to provide infrastructure and projects for public benefit, at the lowest cost to the
public. Public works projects are intended to benefit the public, not bidders. (Swinerton
& Walberg Co. v. City of Inglewood-L.A. County Civic Center Authority (1974) 40
Cal. App. 3d 98, 101 [lowest bidder on public works contract has no tort cause of action
12
against public entity for awarding contract to second lowest bidder because competitive
bidding requirements were imposed solely for the benefit and protection of the public
rather than for the benefit of the bidders]; Charles L. Harney, Inc. v. Durkee (1951) 107
Cal. App. 2d 570, 580 [“competitive bidding statutes are not passed for the benefit of
bidders but for the benefit and protection of the public”]; see Kajima/Ray Wilson v. Los
Angeles County Metropolitan Transportation Authority (2000) 23 Cal. 4th 305, 308, 317
(Kajima) [low bidder may recover bid preparation costs from public agency for wrongful
denial of contract under promissory estoppel theory, but not lost profits; “competitive
bidding statutes are ‘ “enacted for the benefit of property holders and taxpayers, and not
for the benefit or enrichment of bidders” ’ ”; allowing award of lost profits would not
benefit the general public].)
Although the majority says this expansion of the tort will permit the second lowest
bidder to sue the winning bidder who won the award by engaging in illegal conduct, there
is no reason why the newly expanded tort will not provide a cause of action to every
bidder that alleges all the lower bidders engaged in wage theft, or predatory pricing, or
bribery, or provided sexual or other favors, or engaged in any other kind of illegal
conduct. Imposing a duty upon each bidder owed to competing bidders giving rise to an
actionable claim of interference with prospective economic advantage would disrupt,
increase the cost, and delay the completion of public works. (See generally Kajima,
supra, 23 Cal.4th at p. 317 [the possibility of recovering lost profits against public agency
alone may encourage frivolous litigation and further expend public resources; “prudence
is warranted whenever courts fashion damages remedies in an area of law governed by an
extensive statutory scheme”].)
For these reasons, I cannot agree with the majority that plaintiffs have stated a
claim for intentional interference with prospective economic advantage. I would affirm
the trial court’s judgment.
GRIMES, J.
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