Chapter ⅩⅤ　ECONOMIC INJURIES (Ⅱ)

Tortious Interference With Advantageous Relations

Lumley v.Gye

Queen’s Bench,1853

2 El.& Bl.216,118 Eng.Rep.749

[The declaration alleged: Plaintiff,manager of the Queens Theatre for per-forming operas,contracted with Johanna Wagner for her to perform in his theatre for a designated time.She agreed not to perform elsewhere during the contract term.Defendant,“knowing the premises and maliciously intruding to injure plaintiff …,enticed and procured Wagner to refuse to perform.” Defendant demurred.]

ERLE.J.The question raised upon this demurrer is,whether an action will lie by the proprietor of a theatre against a person who maliciously procures an entire abandonment of a contract to perform exclusively at that theatre for a certain time;whereby damage was sustained? And it seems to me that it will.The authorities are numerous and uniform,that an action will lie by a master against a person who procures that a servant should unlawfully leave his service.The principle involved in these cases comprises the present;for,there,the right of action in the master arises from the wrongful act of the defendant in procuring that the person hired should break his contract,by putting an end to the relation of employer and employed;and the present case is the same.If it is objected that this class of actions for procuring a breach of contract of hiring rests upon no principle,and ought not to be extended beyond the cases heretofore decided,and that,as those have related to contracts respecting trade,manufactures,or household service,and not to performance at a theatre,therefore they are no authority for an action in respect of a contract for such performance;the answer appears to me to be,that the class of cases referred to rests upon the principle that the procurement of the violation of the rights is a cause of action,and that,when this principle is applied to a violation of a right arising upon a contract of hiring,the nature of the service contracted for is immaterial.

It is clear that the procurement of the violation of a right is a cause of action in all instances where the violation is an actionable wrong,as in violations of a right to property,whether real or personal,or to personal security: he who procures the wrong is a joint wrongdoer,and may be sued,either alone or jointly with the agent,in the appropriate action for the wrong complained of….He who maliciously procures a damage to another by violation of his right ought to be made to indemnify;and that whether he procures an actionable wrong or a breach of contract.He who procures the non-delivery of goods according to contract may inflict an injury,the same as he who procures the abstraction of goods after delivery;and both ought on the same ground to be made responsible.The remedy on the contract may be inadequate….

The result is that there ought to be,in my opinion,judgment for the plaintiff.

Testing Systems,Inc.v.Magnaflux Corp.

United States District Court,Eastern District of Pennsylvania,1966

251 F.Supp.286

[Plaintiff and defendant were competing manufacturers of equipment,devices and systems for use in testing industrial and commercial materials.The complaint alleged that defendant circulated to plaintiff’s current and prospective customers a false report to the effect that the United States Government had tested plaintiff’s product,and found it to be only about 40% as effective as that of the defendant.Plaintiff also claimed that at a manufacturers’ convention in Philadelphia defendant’s agent,in the presence of plaintiff’s current and prospective customers “did in a loud voice state that … [plaintiff’s] … stuff is no good,” and that “the government is throwing them out.”]

LORD,DISTRICT JUDGE.This is an action for trade libel or disparagement of property….The matter is now before this Court on defendant’s motion to dismiss for failure to state a claim upon which relief can be granted.

For the purposes of this motion,defendant admits the truth of the allegation,but asserts that the action must nevertheless be dismissed because (1) the defendant did no more than make an unfavorable comparison of plaintiff’s product with its own;and (2) even assuming that the statements were actionable,plaintiff has failed to allege his damages with the required specificity….

It would serve no useful purpose to dwell at length on the issue of unfavorable comparison.Suffice it to say,as the defendant properly points out,that a statement which takes the form of an unfavorable comparison of products,or which “puffs” or exaggerates the quality of one’s own product is not ordinarily actionable.This has long been the rule in England,where the action originated,and is now well established in the vast majority of United States jurisdictions.

However,this Court is not convinced by the defendant’s arguments that his comments amounted to mere unfavorable comparison.The modern history of the doctrine of unfavorable comparison and its permissible use in the conduct of bus-i ness traces its origin to the leading English case of White v.Mellin [1895] A.C.154.There the defendant had advertised his product as being far more healthful than plaintiff’s.In refusing relief the Court established the precedent that irrespective of their truth or falsity,statements by one competitor which compare his product with that of another are not actionable.

It does not follow from this,however,that every trade disparagement is protectible under the guise of unfavorable comparison merely because the perpetrator was canny enough to mention not only the product of his competitor but also his own.The decision in White v.Mellin was founded on the near impossibility of ascertaining the truth or falsity of general allegations respecting the superiority of one product over another.To decide otherwise,explained Lord Herschell,would turn the courts “into a machinery for advertising rival productions by obtaining a judicial determination [as to] which of the two was better.One is expected to believe in the superiority of his wares,and he may properly declare his belief to interested parties.It has even been said that he may ‘boast untruthfully of his wares.’” Phila.D.Prod.v.Quaker City I.Co.,306 Pa.165 (1932)….

The fine line that separates healthy competitive effort from underhanded business tactics is frequently difficult to determine.Apart from the tradesman’s right of free speech,which must be vigorously safeguarded,the public has a genuine interest in learning the relative merits of particular products,however that may come about….

Nonetheless,there is an outer perimeter to permissible conduct.The tradesman must be assured that his competitors will not be suffered to engage in conduct which falls below the minimum standard of fair dealing.“[I]t is no answer that they can defend themselves by also resorting to disparagement.A self-respecting business man will not voluntarily adopt,and should not be driven to adopt,a selling method which he regards as undignified,unfair,and repulsive.A competitor should not,by pursuing an unethical practice force his rival to choose between its adoption and the loss of his trade.” Wolfe,UNFAIR COMPETITION,47 Yale L.J.1304,1334～35 (1938).

The defendant’s comments in the case presently before this Court do not entitle him to the protection accorded to “unfavorable comparison.” This is a readily observable difference between saying that one’s product is,in general,better than another’s ...and asserting,as here,that such other’s is only 40% as effective as one’s own.The former,arguably,merely expresses an opinion,the truth or falsity of which is difficult or impossible of ascertainment.The latter,however,is an assertion of fact,not subject to the same frailties of proof,implying that the party making the statement is fortified with the substantive facts necessary to make it.This distinction has never been seriously questioned.See e.g.,Restatement,Torts,§§ 626,627,628.The defendant in this case admittedly circulated to plaintiff’s present and prospective customers false statements to the effect that the government had tested both products and found the defendant’s to be 60% more effective than plaintiff’s.This is not the sort of “comparison” that courts will protect.

Apart from this,there is at least one additional factor which withdraws the defendant’s comments from the category of unfavorable comparison.Not content with making the admittedly false statements and allowing them to be evaluated independently of any extraneous influence,the defendant here gave added authenticity to its assertions,by invoking the reputation of a third party,the United States Government.It is unnecessary to speculate on the additional force the defendant’s remarks must have had when coupled with the purported approval of so highly credible a source.This,of course,is to say nothing of the statements to the effect that plaintiff had been “thrown out,” which by no stretch of the imagination could be termed mere comparison.

For all of the above reasons,it is the judgment of this Court that the defendant’s remarks are actionable.

Della Penna v.Toyota Motor Sales,U.S.A.,Inc.

Supreme Court of California,1995

11 Cal.4th 376;902 P.2d 740

ABRABIAN,J.We granted review to reexamine,in light of divergent rulings from the Court of Appeal and a doctrinal evolution among other state high courts,the elements of the tort variously known as interference with “prospective economic advantage,” “prospective contractual relations,” or “prospective economic relations,” and the allocation of the burdens of proof between the parties to such an action.We conclude that those Court of Appeal opinions requiring proof of a so-called “wrongful act” as a component of the cause of action,and allocating the burden of proving it to the plaintiff,are the better reasoned decisions;we accordingly adopt that analysis as our own,disapproving language in prior opinions of this court to the contrary.Such a requirement,incorporating the views of several other jurisdictions,much of the Restatement Second of Torts,the better reasoned decisions of the Court of Appeal,and the view of leading academic authorities,sensibly redresses the balance between providing a remedy for predatory economic behavior and keeping legitimate business competition outside litigative bounds.We do not in this case,however,go beyond approving the requirement of a showing of wrongfulness as part of the plaintiff’s case;the case,if any,to be made for adopting refinements to that element of the tort – requiring the plaintiff to prove,for example,that the defendant’s conduct amounted to an independently tortious act,or was a species of anticompetitive behavior proscribed by positive law,or was motivated by unalloyed malice – can be considered on another day,and in another case.

In this case,after the trial court modified the standard jury instruction to require the plaintiff automobile dealer to show that defendant Toyota’s interference with his business relationship was “wrongful,” the jury returned a verdict for Toyota.The Court of Appeal reversed the ensuing judgment and order a new trial on the ground that plaintiff’s burden of proof did not encompass proof of a“wrongful” act and that the modified jury instruction was therefore erroneous.Given our conclusion that the plaintiff’s burden does include proof that the defendant’s conduct was wrongful by some measure other than an interference with the plaintiff’s interest itself,we now reverse the Court of Appeal and direct that the judgment of the trial court be affirmed.

I

John Della Penna,an automobile wholesaler doing business as Pacific Motors,brought this action for damages against defendant Toyota Motor Sales,U.S.A.,Inc.,and its Lexus division,alleging that certain business conduct of defendants both violated [the] state antitrust statute,and constituted an intentional interference with his economic relations.The impetus for Della Penna’s suit arose out of the 1989 introduction into the American luxury car market of Toyota’s Lexus automobile.Prior to introducing the Lexus,the evidence at trial showed,both the manufacturer,Toyota Motor Corporation,and defendant,the American distributor,had been concerned about the possibility that a resale market might develop for the Lexus in Japan….Fearing that auto wholesalers in the United States might reexport Lexus models back to Japan for resale,and concerned that,with production and the availability of Lexus models in the American market limited,reexports would jeopardize its fledgling network of American Lexus dealers,Toyota inserted in its dealership agreements a “no export” clause,providing that the dealer was “authorized to sell [Lexus automobiles] only to customers located in the United States.[Dealer] agrees that it will not sell [Lexus automobiles] for resale or use outside the United States.[Dealer] agrees to abide by any export policy established by [distributor].”

Following introduction into the American market,it soon became apparent that some domestic Lexus units were being diverted for foreign sales,principally to Japan.To counter this effect,Toyota managers wrote to their retail dealers,reminding them of the “no-export” policy and explaining that exports for foreign resale could jeopardize the supply of Lexus automobiles available for the United States market.In addition,Toyota compiled a list of “offenders” – dealers and others believed by Toyota to be involved heavily in the developing Lexus foreign resale market – which it distributed to Lexus dealers in the United States.American Lexus dealers were also warned that doing business with those whose names appeared on the “offenders” list might lead to a series of graduated sanctions,from reducing a dealer’s allocation to possible reevaluation of the dealer’s franchise agreement.

During the years 1989 and 1990,plaintiff Della Penna did a profitable business as an auto wholesaler purchasing Lexus automobiles,chiefly from the Lexus of Stevens Creek retail outlet,at near retail price and exporting them to Japan for resale.By late 1990,however,plaintiff’s sources began to dry up,primarily as a result of the “offenders list.” Stevens Creek ceased selling models to plaintiff;gradually other sources declined to sell to him as well.

In February 1991,plaintiff filed this lawsuit against Toyota Motor Sales,U.S.A.,Inc.,alleging both state antitrust claims … and interference with his economic relationship with Lexus retail dealers.At the close of plaintiff’s casein-chief,the trial court granted Toyota’s motion for nonsuit with respect to the remaining [antitrust] claim (plaintiff had previously abandoned a related claim– unfair competition – prior to trial).The tort cause of action went to the jury,however,under the standard BAJI instructions application to such claims with one significant exception.At the request of defendant and over plaintiff’s objection,the trial judge modified BAJI No.7.82 – the basic instruction identifying the elements of the tort and indicating the burden of proof – to require plaintiff to prove that defendant’s alleged interfering conduct was “wrongful.”

The jury returned a divided verdict,nine to three,in favor of Toyota.After Della Penna’s motion for a new trial was denied,he appealed.In an unpublished disposition,the Court of Appeal unanimously reversed the trial court’s judgment,ruling that a plaintiff alleging intentional interference with economic relations is not required to establish “wrongfulness” as an element of its prima facie case,and that it was prejudicial error for the trial court to have read the jury an amended instruction to that effect.The Court of Appeal remanded the case to the trial court for a new trial;we then granted Toyota’s petition for review and now reverse.

II

A(https://www.daowen.com)

Although legal historians have traced the origins of the so-called “interference torts” as far back as the roman law,the proximate historical impetus for their modern development lay in mid-19th century English common law.(See,e.g.,Sayre,Inducting Breach of Contract 1923) 36 Harv.L.Rev.663;Note,Tortious Interference With Contractual Relations in the Nineteenth Century: The Transformation of Property,Contract,and Tort (1980) 93 Harv.L.Rev.1510) The opinion of the Queen’s Bench in Lumley v.Gye (1853) 2 El.& Bl.216 [118 Eng.Rep.749],a case that has become a standard in torts casebooks,is widely cited as the origin of the two torts – interference with contract and its sibling,interference with prospective economic relations – in the form in which they have come down to us….

The opinion in Lumley v.Gye dealt,of course,with conduct intended to induce the breach of an existing contract,not conduct intended to prevent or persuade others not to contract with the plaintiff.That such an interference with prospective economic relations might itself be tortious was confirmed by the Queen’s Bench over the next 40 years.In Temperton v.Russell (1893) 1 Q.B.715 (Temperton),a labor union,embroiled in a dispute with a firm of builders,announced what today would be called secondary boycott,intended to force a resolution of the union’s grievances by pressuring suppliers of the builder to cease furnishing him construction materials.A failure to comply with the union’s boycott demands,suppliers were warned,would result in union pressure on those who bought their supplies not to deal with them.

One such supplier of the builder,Temperton,sued the union’s leadership,alleging that his business had been injured by breaches of supply contracts and the refusal of others to do business with him,all as a result of the union’s threats.A unanimous Queen’s Bench upheld the jury’s verdict for the plaintiff,reasoning in part on the authority of Lumley v.Gye,supra,2 El.& Bl.216,that in the words of Lord Esher,the Master of the Rolls,“the distinction … between the claim for inducing persons to break contracts already entered into … and … inducing persons not to enter into contract … can[not] prevail.” (Temperton,supra,1Q.B.at p.728)

“There was the same wrongful intent in both cases,wrongful because malicious,” Lord Esher wrote.“There was the same kind of injury to the plaintiff.It seems rather a fine distinction to say that,where a defendant maliciously induces a person not to carry out a contract already made with the plaintiff and so injures the plaintiff,it is actionable,but where he injures the plaintiff by maliciously preventing a person from entering into a contract with the plaintiff,which he would otherwise have entered into,it is not actionable.” (Temperton,supra,1 Q.B.at p.728.)

As a number of courts and commentators have observed,the keystone of the liability imposed in Lumley v.Gye and Temperton,to judge from the opinions of the justices,appears to have been the “malicious” intent of a defendant in enticing an employee to breach her contract with the plaintiff,and in damaging the business of one who refused to cooperate with the union in achieving its bargaining aims.While some have doubted whether the use of the word “malicious” amounted to anything more than an intent to commit an act,knowing it would harm the plaintiff,Dean Keeton,assessing the state of the tort as late as 1984,remarked that“[w]ith intent to interfere as the usual basis of the action,the cases have turned almost entirely upon the defendant’s motive or purpose and the means by which he has sought to accomplish it.As in the cases of interference with contract,any manner of intentional invasion of the plaintiff’s interests may be sufficient if the purpose is not a proper one.” (Prosser & Keeton on Torts (5th ed.1984) Interference with Prospective Advantage,§ 130,p.1009.)

It was,legal historians have suggested,this early accent on the defendant’s“intentionality” that was responsible for allying the interference torts with their remote relatives,intentional torts of a quite different order – battery,for example,or false imprisonment.More than one account of the rise of the tort has relied on Lord Bowen’s statement in an interference with contract case that “intentionally to do that which is calculated in the ordinary course of events to damage,and which does,in fact,damage another in that person’s property or trade,is actionable if done without just cause or excuse.” (Mogul Steamship Co.v.McGregor,Gow & Co. (1889) 23 Q.B.D.598,613.)

One consequence of this superficial kinship was the assimilation to the interference torts of the pleading and burden of proof requirements of the “true”intentional torts: the requirement that the plaintiff need only allege a so-called“prima facie tort” by showing the defendant’s awareness of the economic relation,a deliberate interference with it,and the plaintiff’s resulting injury.By this account of the matter – the traditional view of the torts and the one adopted by the first Restatement of Torts – the burden then passed to the defendant to demonstrate that its conduct was privileged,that is,“justified” by a recognized defense such as the protection of others or,more likely in this context,the defendant’s own competitive business interest.

These and related features of the economic relations tort and the requirements surrounding its proof and defense led,however,to calls for a reexamination and reform as early as the 1920’s.tracing the origins and the current status of the two interference torts in 1923,Francis Sayre concluded that “a somewhat uncertain law has resulted….Courts still punctiliously repeat the well-known formula which requires ‘malice,’ or ‘without just cause’ … as one of the requirements of the tort;but there has been such a lack of agreement as to what constitutes‘malice’ or ‘absence of justification’ that such words are becoming little more than empty phrases….Is it not time to formulate the problem of what these worn phrases mean?” (Sayre,Inducing Breach of Contract,supra,36 Harv.L.Rev.at pp.672,674-675,fn.omitted.) The nature of the wrong itself seemed to many unduly vague,inviting suit and hampering the presentation of coherent defenses.More critically in the view of others,the procedural effects of applying the prima facie tort principle to what is essentially a business context led to even more untoward consequences.

Because the plaintiff’s initial burden of proof was such a slender one,amounting to no more than showing the defendant’s conscious act and plaintiff’s economic injury,critics argued that legitimate business competition could lead to time consuming and expensive lawsuits (not to speak of potential liability) by a rival,based on conduct that was regarded by the commercial world as both commonplace and appropriate.The “black letter” rules of the Restatement of Torts surrounding the elements and proof of the tort,some complained,might even suggest to “foreign lawyers reading the Restatement as an original matter [that] the whole competitive order of American industry is prima facie illegal.” (Statement of Professor Carl Auerbach at ALI Proceedings,quoted in Perlman,Interference With Contract and Other Economic Expectancies: A Clash of Tort and Coctract Doctrine (1982) 49 U.Chi.L.Rev.61,79,fn.89….)

Calls for a reformulation of both the elements and the means of establishing the economic relations tort reached a height around the time the Restatement Second of Torts was being prepared for publication and are reflected in its departures from its predecessor’s version.Acknowledging criticism,the American Law Institute discarded the prima facie tort requirement of the first Restatement.A new provision,section 766B,required that the defendant’s conduct be “improper,” and adopted a multifactor ‘balancing’ approach,identifying seven factors for the trier of fact to weigh in determining a defendant’s liability.The Restatement Second of Torts,however,declined to take a position on the issue of which of the parties bore the burden of proof,relying on the “considerable disagreement on who has the burden of pleading and proving certain matters” and the observation that “the law in this area has not fully congealed but is still in a formative stage.” In addi-tion,the Restatement Second conduct was justifiable and did not include the use of “wrongful means.”

B

In the meantime,however,an increasing number of state high courts had traveled well beyond the Restatement Second’s reforms by redefining and otherwise recasting the elements of the economic relations tort and the burdens surrounding its proof and defenses.In Top Serv.Body Shop,Inc.v.Allstate Ins.Co.(1978) 283 Ore.201 [582 P.2d 1365] (Top Service),the Oregon Supreme Court,assessing this “‘most fluid and rapidly growing tort,’” noted that “efforts to consolidate both recognized and unsettled lines of development into a general theory of ‘tortious interference’ have brought to the surface the difficulties of defining the elements of so general a tort without sweeping within its terms a wide variety of socially very different conduct.”

Recognizing the force of these criticisms,the court went on to hold in Top Service that a claim of interference with economic relations “is made out when interference resulting in injury to another is wrongful by some measure beyond the fact of the interference itself.Defendant’s liability may arise from improper motives or from the use of improper means.They may be wrongful by reason of a statute or other regulation,or a recognized rule of common law,or perhaps an established standard of a trade or profession.No question of privilege arises unless the interference would be wrongful but for the privilege;it becomes an issue only if the acts charged would be tortious on the part of an unprivileged defendant.”

Four years later,the view of the Oregon Supreme Court in Top Service were adopted by the Utah Supreme Court.In Leigh Furniture and Carpet Co.v.Isom(Utah 1982) 657 P.2d 293,that court underlined the same concerns that had moved the Oregon Supreme Court in Top Service: “The problem with the prima facie tort approach is that basing liability on a mere showing hat defendant intentionally interfered with plaintiff’s prospective economic relations makes actionable all sorts of contemporary examples of otherwise legitimate persuasion,such as efforts to persuade others not to … engage in certain activities,or deal with certain entities.The major issue in the controversy – justification for the defendant’s conduct – is left to be resolved on the affirmative defense of privilege.In short,the prima facie approach to the tort of interference with prospective economic relations requires too little of the plaintiff.”

The Utah Supreme Court went on,however,to reject the alternative,multifactor approach adopted by the Restatement Second: “We concur in the Restatement (Second)’s rejection of the prima facie tort approach because it leaves too much uncertainty about the requirements for a recognized privilege and the defendant’s burden of pleading and proving these and other matters.But we also reject the Restatement (Second)’s definition of the tort because of its complexity.We seek a better alternative.” That alternative,the court concluded,was the one advanced by the Oregon Supreme Court in Top Service,a “middle ground” that requires “the plaintiff to allege and prove more than the prima facie tort,but not to negate all defenses of privilege.”

Over the past decade or so,close to a majority of the high courts of American jurisdictions have imported into the economic relations tort variations on the Top Service line of reasoning,explicitly approving a rule that requires the plaintiff in such a suit to plead and prove the alleged interference was either “wrongful,”“improper,” “illegal,” “independently tortious” or some variant on these formulations….

III

[O]ur early economic relations cases were principally of two types,either the classic master and servant pattern of the pre-Lumley v.Gye cases (see,e.g.,Buxbom v.Smith (1944) [hiring away of plaintiff’s employees by defendant after plaintiff had built up his business to distribute defendant’s publication and defendant had breached distribution contract held actionable as “an unfair method of interference with advantageous relations”]) or those involving circumscribed kinds of business relations in which the plaintiff,typically a real estate broker or attorney working on a contingency,sued to recover fees after defendant had refused to share property sales proceeds or a personal injury recovery.

California cases thus reflected the historical origins and development of the tort,especially as it stood prior to the revisions of the Restatement Second and the concurrent evolution in the case law.In Zimmerman v.Bank of America (1961),for example,the plaintiff real estate agent alleged that the defendant bank had“maliciously” induced third parties to breach an oral agreement with him to broker the sale of their property.In holding that the statute of frauds did not bar the plaintiff’s interference claim,the Court of Appeal discussed the relationship between the two interference torts.Writing for the court,Justice Tobriner both aligned the source of the economic relations tort with its contractual sibling and employed language that bears a striking symmetry with Lord Esher’s statement in Temperton,“The history of the tort,” he wrote,“discloses its essence.It contemplates,basically,a disruption of a relationship,not necessarily the breach of a contract….We cannot conceive how the action for interference with an existing lawful contract,even though unenforceable,could occupy a status lower than that of interference with negotiations contemplating a contract.If interference with the negotiations constitutes the tort,interference with the contract in which the negotiations fructify must necessarily constitute the tort.” (Zimmerman)

This court endorsed the reasoning of Zimmerman v.Bank of America in Buckaloo,a case in which the plaintiff sued the seller and buyers of beachfront property to recover damages for the loss of his commission from the sale of the land.Among other claims,plaintiff alleged that defendants had intentionally interfered with an expectancy arising out of the seller’s open invitation to brokers and his preliminary discussions regarding the sale of the property with the buyers.Upholding the allegations of the complaint as sufficient to survive a demurrer,we characterized the economic relations tort as one “infrequently invoked” but a“more inclusive wrong” than its relative,intentional interference with contract.

Our opinion in Buckaloo reviewed a number of Court of Appeal decisions upholding the applicability of the tort to real estate brokerage situations and concluded by identifying the following elements of the cause of action.“In a real estate brokerage context these are: (1) an economic relationship between broker and vendor or broker and vendee containing the probability of future economic benefit to the broker,(2) knowledge by the defendant of the existence of the relationship,(3) intentional acts on the part of the defendant designed to disrupt the relationship,(4) actual disruption of the relationship,(5) damages to the plaintiff proximately caused by the acts of the defendant.”

“In California,” we went on to observe,“privilege or justification is an affirmative defense,and the lack thereof need not be shown by the original pleader.”A note of caution,however,crept into our formulation of principles at this point.“Perhaps the most significant privilege or justification for interference with a perspective business advantage is free competition,” we wrote,“Ours is a competitive economy in which business entities vie for economic advantage.In a sense,all vendees are potential buyers of the products and services of all sellers in a given line,and success goes to him who is able to induce potential customers not to deal with a competitor.”

In Seaman’s Direct Buying Service,Inc.v.Standard Oil Co. (1984) (Seaman’s),relying on the first Restatement and without reviewing or even mentioning intervening revaluations of the tort by the Restatement Second,other state high courts and our own Court of Appeal,we again endorsed the prima facie tort pleading and burden of proof format,noting that “[o]nly if and when plaintiff establishes an ‘intent to interfere’ does the issue of ‘justification’ come into play.‘[W]hile defendant’s culpable intent is an element of the cause of action to be pleaded and proved by plaintiff,defendant’s justification is an affirmative defense….’” We went on to observe that “[defendant] is mistaken when it implies that an improper ‘motive’ is an element of plaintiff’s cause of action rather than a factor in defendant’s affirmative defense.It is not.”

Although our opinions following Seaman’s,to the extent they addressed the question at all,continued to enumerate the same prima facie elements of the economic relations tort,the cases consistently denied the plaintiff recovery….

Meanwhile,developments in the Court of Appeal and in the practical administration of such claims in the trial courts had,if anything,outdistanced our own formulations of the elements of the tort and the allocation of the burden of proof in at least two respects.First,several Court of Appeal opinions appeared to engraft onto the elements of the plaintiff’s cause of action allegations and proof that the defendant’s conduct was “wrongful.” …

Second,in 1990 BAJI,the Book of Approved Jury Instructions widely used by trial judges in civil cases,relying on the Restatement Second of Torts and Mr.Witkin’s account of the tort,included an instruction providing that a defendant in an economic relations tort case could defeat liability by showing that its conduct was not independently “wrongful.”

These developments,of course,closely reflect a nearly concurrent change in views both within the American Law Institute and in other jurisdictions.In the face of those twin lines of development,we are thus presented with the opportunity to consider whether to expressly reconstruct the formal elements of the interference with economic relations tort to achieve a closer alignment with the practice of the trial courts,emerging views within the Court of Appeal,the rulings of many other state high courts,and the critiques of leading commentators.We believe that we should.

IV

In searching for a means to recast the elements of the economic relations tort and allocate the associated burdens of proof,we are guided by an overmastering concern articulated by high courts of other jurisdictions and legal commentators:the need to draw and enforce a sharpened distinction between claims for the tortious disruption of an existing contract and claims that a prospective contractual or economic relationship has been interfered with by the defendant.Many of the cases do in fact acknowledge a greater array of justificatory defenses against claims of interference with prospective relations.Still,in our view and that of several other courts and commentators,the notion that the two torts are analytically unitary and derive from a common principle sacrifices practical wisdom to theoretical insight,promoting the idea that the interests invaded are of nearly equal dignity.They are not.

The courts provide a damage remedy against third party conduct intended to disrupt an existing contract precisely because the exchange of promises resulting in such a formally cemented economic relationship is deemed worthy of protection from interference by a stranger to the agreement.Economic relationships short of contractual,however,should stand on a different legal footing as far as the potential for tort liability is reckoned.Because ours is a culture firmly wedded to the social rewards of commercial contests,the law usually takes care to draw lines of legal liability in a way that maximizes areas of competition free of legal penalties.

A doctrine that blurs the analytical line between interference with an existing business contract and interference with commercial relations less than contractual is one that invites both uncertainty in conduct and unpredictability of its legal effect.The notion that inducing the breach of an existing contract is simply a subevent of the “more inclusive” class of acts that interfere with economic relations,while perhaps theoretically unobjectionable,has been mischievous as a practical matter.Our courts should,in short,firmly distinguish the two kinds of business contexts,bringing a greater solicitude to those relationships that have ripened into agreements,while recognizing that relationships short of that subsist in a zone where the rewards and risks of competition are dominant.

Beyond that,we need not tread today.It is sufficient to dispose of the issue before us in this case by holding that a plaintiff seeking to recover for alleged interference with prospective economic relations has the burden of pleading and proving that the defendant’s interference was wrongful “by some measure beyond the fact of the interference itself.” It follows that the trial court did not commit error when it modified BAJI No.7.82 to require the jury to find that defendant’s interference was “wrongful.” And because the instruction defining “wrongful conduct” given the jury by the trial court was offered by plaintiff himself,we have no occasion to review its sufficiency in this case.The question of whether additional refinements to the plaintiff’s pleading and proof burdens merit adoption by California courts – questions embracing the precise scope of “wrongfulness,”or whether a “disinterested malevolence,” in Justice Holmes’s words (Amer.Bank & Trust Co.v.Federal Bank (1921),is an actionable interference in itself,or whether the underlying policy justification for the tort,the efficient allocation of social resources,justifies including as actionable conduct that is recognized as anticompetitive under established state and federal positive law – are matters that can await another day and a more appropriate case.

Conclusion

We hold that a plaintiff seeking to recover for an alleged interference with prospective contractual or economic relations must plead and prove as part of its case-in-chief that the defendant not only knowingly interfered with the plaintiff’s expectancy,but engaged in conduct that was wrongful by some legal measure other than the fact of interference itself.The judgment of the Court of Appeal is reversed and the cause is remanded with directions to affirm the judgment of the trial court.

Family Relations

Nash v.Baker

Court of Appeals of Oklahoma,1974

522 P.2d 1335

ROMANG,JUDGE.The appellants,hereinafter referred to as plaintiffs,are five minor children whose mother,Marian Nash,brings this appeal as their natural guardian and next friend.The appellee is hereinafter referred to as the defendant.

Marian Nash filed the petition in her own right and as next friend of the infant plaintiffs,alleging that after Marian Nash and James Nash had been husband and wife for about 18 years and had five children (the minor plaintiffs) of that union,the defendant,a wealthy widow,who knew or should have known of the marriage and children,lured James Nash,the husband and father,away from the plaintiffs by providing said James Nash with a finer home,sexual charms,and other inducements.The plaintiff Marian Nash sought to recover actual and punitive damages in her own right for the alienation of her husband’s affections,loss of consortium,and loss of a prospective increased standard of living.In addition,as next friend of her children,she sought recovery of actual and punitive damages under the common law for alienation of their father’s affections,interference with their family relationships,and “loss of the society,affection,assistance,moral support and guidance” of their father.The petition also alleged adultery by the defendant with said James Nash.

The trial court sustained the defendant’s demurrer as to each of the minor plaintiffs’ asserted causes of action and overruled it as to Marian Nash’s suit in her own right.The latter suit was tried to a jury,resulting in a verdict for the defendant.The only questions before this court deal with whether any cause of action may be maintained on behalf of the minor children of a marriage,against a woman who entices away their father from the marital home.

The sole question remaining is whether … a minor child has in Oklahoma a common law right to sue a third person whose luring away of the father breaks up the parents’ marriage and deprives the child of the father’s society and guidance.The common law recognized no such right in the child.That the injured spouse has an action for alienation of affections,loss of consortium,or criminal convers-a tion does not require that a cause of action be given to the child….The plaintiffs cite Prosser,Law of Torts 908 (3d ed.1964) which,although recognizing that the majority of those jurisdictions which passed on the question have denied the child an action,predicts that in the future additional jurisdictions will allow his action.On the other hand,… modern statutes abolishing causes of action for alienation of affections,breach of promise to marry,and related actions;the increasing failure of marriages,reportedly more than one in three ending in absolute divorce or permanent separation;and the recent liberalization of divorce in several more states,including a ground or grounds not based on “fault”;and the increase in the number of children whose parents have divorced and remarried;may well prevent the future development predicted by the late Professor Prosser.In addition,there may be a growing feeling that very often the “fault” leading to the breakup of a marriage may not be readily determinable in court,and that the “fault” which caused one spouse to be attracted to a third person was not the magnetism of such third person,but that of an emotional vacuum in the home.

Affirmed.