A California Interference with Contract Claim requires a Stranger to the Contract to Interfere – But the Stranger May Have an Economic Interest in the Contract

California recognizes a cause of action against noncontracting parties who interfere with the performance of a contract. If you and I have a contract, and John Doe (not part of our contract) tells you that I’m a bum and will never be able to perform the contract, and convinces you to terminate or breach our contract, Joe Doe may be liable. Sacramento attorneys see this issue arise where it comes down to whether there was merely competition – aggressive, but not wrongful, tortuous conduct. The elements of a cause of action for intentional interference with contractual relations are “(1) the existence of a valid contract between the plaintiff and a third party; (2) the defendant’s knowledge of that contract; (3) the defendant’s intentional acts designed to induce a breach or disruption of the contractual relationship; (4) actual breach or disruption of the contractual relationship; and (5) resulting damage.” In a recent decision the court found that the stranger to the contract could have a financial interest in it but still be stranger enough to be liable for intentional interference.

In Wayne Redfearn v. Trader Joe’s Company, Redfearn owned a food brokerage business. It represented manufacturers of food products to place their goods in Trader Joe’s. When a Trader Joe’s rep met with one of Redfearn’s clients, and falsely accused Redfearn of spreading Rumors that paying bribes to Trader Joe’s employees was the only way to get their product in the stores, and that the client must terminate its relationship with Redfearn or Trader Joe’s would replace them with a different supplier. The clients split with Redfearn, and this interference lawsuit followed.

TJ’s argued that it was not a stranger to Redfearn’s contracts with its clients – performance of those contracts required TJ’s to buy products from these suppliers. TJ’s relied on a Supreme Court decision that the duty not to interfere falls only on interlopers who have “no legitimate in the scope or course of the contract’s performance.” In that case the issue was whether a party could be liable for conspiring with another to interfere in its own contract. (Applied Equipment)

The court declined to “expand the scope of Applied Equipment” to protect a noncontracting party who had “‘some general economic interest’” in the contract. Another court said that “An extension of Applied Equipment’s holding to immunize a third party from tortious interference claims simply because the third party asserts some economic or other interest in a contract would significantly undercut the tort itself and the public policy underlying it.”

The court also looked at the related causes of action of interference with prospective economic advantage.

The elements of intentional interference with prospective economic advantage are “(1) the existence, between the plaintiff and some third party, of an economic relationship that contains the probability of future economic benefit to the plaintiff; (2) the defendant’s knowledge of the relationship; (3) intentionally wrongful acts designed to disrupt the relationship; (4) actual disruption of the relationship; and (5) economic harm proximately caused by the defendant’s action.”

The elements of negligent interference with prospective economic advantage are (1) the existence of an economic relationship between the plaintiff and a third party containing the probability of future economic benefit to the plaintiff; (2) the defendant’s knowledge of the relationship; (3) the defendant’s knowledge (actual or construed) that the relationship would be disrupted if the defendant failed to act with reasonable care; (4) the defendant’s failure to act with reasonable care; (5) actual disruption of the relationship; (6) and economic harm proximately caused by the defendant’s negligence.

The difference between intentional interference and negligent interference with prospective economic advantage relates to the defendant’s intent. The plaintiff must plead and prove not only that the defendant interfered with an economic relationship, but also “that the defendant’s interference was wrongful ‘by some measure beyond the fact of the interference itself.’ 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’

The court concluded that Redfearn had also properly alleged these causes of action.

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