Case Number: BC617379??? Hearing Date: August 01, 2016??? Dept: 51
BC617379
Demurrer to Complaint
Background
On April 15, 2016, plaintiff filed a complaint for (1) tortious interference with contract, (2) intentional interference with prospective economic advantage, and (3) unfair competition. The complaint alleges defendant interfered with plaintiff?s ability to sell its jewelry line at certain retailers. It further alleges that one retailer?s representative told plaintiff?s representative that defendant?s representative approached a customer who was interested in purchasing one of plaintiff?s products and encouraged the customer to go to another floor of the store where defendant?s representative would show the customer defendant?s products. Defendant?s representative was seen photographing and videotaping plaintiff?s products to analyze plaintiff?s products and create a product that would replace plaintiff?s product.
On May 23, 2016, defendants filed the instant demurrer on the grounds that the complaint states insufficient facts and is uncertain. Defendants? counsel filed a compliant meet and confer declaration. CCP ? 430.41; Brian Decl. ? 3. Plaintiff opposes.
The Court considered the moving, opposition, and reply papers, and rules as follows.
Demurrer Standard
The sole issue on demurrer is whether the facts pleaded, if true, state a valid cause of action, i.e., if the complaint pleads facts that would entitle the plaintiff to relief. Garcetti v. Superior Court (1996) 49 Cal.App.4th 1533, 1547; Limandri v. Judkins (1997) 52 Cal.App.4th 326, 339. The question of plaintiff?s ability to prove the allegations of the complaint or the possible difficulty in making such proof does not concern the reviewing court. Quelimane Co. v. Stewart Title Guaranty Co. (1998) 19 Cal.4th 26, 47. The ultimate facts alleged in the complaint must be deemed true, as well as all facts that may be implied or inferred from those expressly alleged. Marshall v. Gibson, Dunn & Crutcher (1995) 37 Cal.App.4th 1397, 1403. Nevertheless, this rule does not apply to allegations expressing mere conclusions of law, or allegations contradicted by the exhibits to the complaint or by matters of which judicial notice may be taken. Vance v. Villa Park Mobilehome Estates (1995) 36 Cal.App.4th 698, 709. Leave to amend must be allowed where there is a reasonable possibility of successfully stating a cause of action. Schulz v. Neovi Data Corp. (2007) 152 Cal.App.4th 86, 92.
Additionally, a special demurrer to a complaint may be brought on the ground the pleading is uncertain, ambiguous, or unintelligible. CCP ? 430.10(f); Beresford Neighborhood Assn. v. City of San Mateo (1989) 207 Cal.App.3d 1180, 1191. A demurrer based on uncertainty is disfavored and will be strictly construed even when the pleading is uncertain in some respects. Khoury v. Maly?s of California, Inc. (1993) 14 Cal.App.4th 612, 616. A demurrer for uncertainty may be sustained when a defendant cannot reasonably determine to what he or she is required to respond. For example, when a plaintiff joins multiple causes of action as one, fails to properly identify each cause of action, or fails to state against which party each cause of action is asserted if there are multiple defendants, a complaint is uncertain. Williams v. Beechnut Nutrition Corp. (1986) 185 Cal.App.3d 135, 139, fn. 2.
First COA: Interference with Contract
Interference with Contract Standard
One who, without a privilege to do so, induces or otherwise purposely causes a third person not to perform a contract with another or not to enter into or continue a business relationship with another is liable to the other for the harm caused thereby. The interest protected in these torts is the interest in reasonable expectations of economic advantage. The types of ?expectancies? are limited to two basic situations: (1) where the tortfeasor induces or otherwise purposely causes a third party not to enter into a business relation or contract with the plaintiff; or (2) where the plaintiff and a third party are already in a business relationship and the tortfeasor induces or otherwise purposely causes the third party to terminate the relationship or breach the contract. Worldwide Commerce, Inc. v. Fruehauf Corp. (1978) 84 Cal.App.3d 803, 808.
The elements which a plaintiff must plead to state the cause of action for intentional interference with contractual relations are (1) a valid contract between plaintiff and a third party, (2) defendant?s knowledge of this contract, (3) 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. Pacific Gas & Electric v. Bear Stearns & Co. (1990) 50 Cal.3d 1118, 1126.
?In an action based on a written contract, a plaintiff may plead the legal effect of the contract rather than its precise language.? Construction Protective Services, Inc. v. TIG Specialty Ins. Co. (2002) 29 Cal.4th 189, 198-199.
Interference with Contract Analysis
Defendants argue the complaint fails to plead the existence of a valid contract, actual breach, or defendants? knowledge of the contract.
Here, the complaint alleges that plaintiff agreed to sell its products to Bergorf Goodman exclusively, except that plaintiff could also sell its products to Neiman Marcus for resale to the consumer retail market on its website, and both retailers bought plaintiff?s products for resale. Complaint ?? 19, 20, 21. The complaint further alleges plaintiff?s line was pulled from the Neiman Marcus website abruptly in November 2015. Complaint ?? 21, 23. Also, beginning around January 2016, Bergdorf Goodman became less responsive to plaintiff, placed no new orders, did not view plaintiff?s new pieces, did not refill or update its cases that formerly contained plaintiff?s products, and ultimately dropped plaintiff?s line. Complaint ?? 26, 29.
Concerning knowledge, the allegations that defendants saw plaintiff?s products for sale at Bergdorf Goodman?s store is sufficient to infer that defendants understood that plaintiff had a contract with Bergdorf Goodman to supply its products for resale to the retail consumer market. Complaint ?? 39, 40, 43.
Problematically, however, even under a liberal pleading standard, the complaint fails to allege any contractual term between plaintiff and the retailers that was breached. Plaintiff?s contract with the retailers could have given the retailers unilateral power to discontinue plaintiff?s line at any time, for any reason. The complaint also does not allege the retailers failed to pay plaintiff. Therefore, the complaint fails to plead sufficient facts to allege the existence of a valid contract or breach.
Second COA: Interference with Prospective Economic Advantage
Interference with Prospective Economic Advantage Standard
The elements for intentional interference with prospective economic advantage are (1) the existence of a prospective economic relationship with the probability of future economic benefit to plaintiff, (2) defendant?s knowledge of the relationship and intent to disrupt it, (3) actual disruption of the relationship, (4) caused by the defendant?s wrongful and unjustified conduct, and (5) plaintiff suffered damages as a result. Youst v. Longo (1987) 43 Cal.3d 64, 71.
Further, interference with a prospective economic relationship must be wrongful by some measure beyond the fact of the interference itself. Della Penna v. Toyota Motor Sales (1995) 11 Cal.4th 376, 393. ?? [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.? Korea Supply Co. v. Lockheed Martin Corp. (2003) 29 Cal.4th 1134, 1159 (citation omitted). ?An act is not independently wrongful merely because defendant acted with an improper motive.? Id. at 1158.
Competition Privilege
Interference with prospective economic advantage is more difficult to prove than interference with contract. It entails an enhanced burden of proving intentionally wrongful conduct by the defendant, and permits the defendant a broader defense based on the competition privilege. PMC, Inc. v. Saban Entertainment, Inc. (1996) 45 Cal.App.4th 579, 595-602 (disapproved of on other grounds by Korea Supply Co. v. Lockheed Martin Corp. (2003) 29 Cal.4th 1134); accord, Bed, Bath & Beyond of La Jolla, Inc. v. La Jolla Village Square Venture Partners (1997) 52 Cal.App.4th 867, 878-879.
?California law has long recognized a ?competition privilege? which protects one from liability for inducing a third person not to enter into a prospective contractual relation with a business competitor. The privilege applies where ? ?(a) the relation [between the competitor and third person] concerns a matter involved in the competition between the actor and the competitor, and (b) the actor does not employ improper means, and (c) the actor does not intend thereby to create or continue an illegal restraint of competition, and (d) the actor?s purpose is at least in part to advance his interest in his competition with the other.? ….? [Citation.] In short, the competition privilege furthers free enterprise by protecting the right to compete fairly in the marketplace. One may compete for an advantageous economic relationship with a third party as long as one does not act improperly or illegally.? Bed, Bath & Beyond of La Jolla, Inc., supra, 52 Cal.App.4th at 880 (emphasis in original, citation omitted).
Bed, Bath & Beyond held, ?Plaintiff failed to meet that burden in opposing Linens ?N Things? motion for summary adjudication. Plaintiff has steadfastly maintained that Linens ?N Things? inducing La Jolla to break off relations with plaintiff by offering a more lucrative lease is sufficient in and of itself to subject Linens ?N Things to tort liability. Plaintiff has never shown or even contended that Linens ?N Things engaged in conduct which is wrongful by some measure beyond the fact of interference itself.[] The record establishes that Linens ?N Things merely competed successfully for a lease of the subject retail premises by offering La Jolla a better deal. The court did not err in granting Linens ?N Things? motion for summary adjudication of plaintiff?s cause of action for intentional interference with prospective economic advantage.? Id. at 882 (footnote omitted).
?In short, it is no tort to beat a business rival to prospective customers. Thus, in the absence of prohibition by statute, illegitimate means, or some other unlawful element, a defendant seeking to increase his own business may cut rates or prices, allow discounts or rebates, enter into secret negotiations behind the plaintiff?s back, refuse to deal with him or threaten to discharge employees who do, or even refuse to deal with third parties unless they cease dealing with the plaintiff, all without incurring liability.? A-Mark Coin Co. v. General Mills, Inc. (1983) 148 Cal.App.3d 312, 324 (internal quotations and citation omitted).
Interference with Prospective Economic Advantage Analysis
Defendant argues that the complaint fails to plead facts supporting the requirement that the interference must be wrongful by some measure beyond the fact of the interference itself. In opposition, plaintiff argues that allegations show defendants? conduct violated the unfair competition law. The Court agrees that plaintiff?s argument is circular because an unfair competition law violation must generally be supported by a predicate offense. See, e.g., Aleksick v. 7-Eleven, Inc. (2012) 205 Cal.App.4th 1176; Yanting Zhang v. Superior Court (2013) 57 Cal.4th 364.
Moreover, A-Mark makes clear that defendants? allegedly threatening to refuse to deal with the retailers unless they cease dealing with the plaintiff is protected and cannot be the basis of liability as a matter of law. A-Mark Coin Co., supra, 148 Cal.App.3d at 324; Complaint ? 30. Additionally, a mere threat to discontinue an ?exclusivity? appears to be a standard negotiation technique, similar to Linens ?N Things? offering a more lucrative lease. Bed, Bath & Beyond of La Jolla, Inc., supra, 52 Cal.App.4th at 882. Also, although not raised, plaintiff provides no authority or reason why defendants? photographing plaintiff?s products was wrongful. Complaint ? 40. Rather, there appears to be no reason why a jewelry maker could not rightfully investigate a competitor?s wares. Keeping up with one?s competitors is one of the keys to fair competition.
Therefore, even if plaintiff could rely on a theory that the unfair competition law violation could satisfy the independently wrongful conduct requirement, the complaint fails to state facts supporting an unfair competition law violation because defendants? alleged conduct is protected by the competition privilege.
Third COA: Unfair Competition
The elements of an unfair competition law claim are (1) a business practice, (2) that is unfair, unlawful, or fraudulent, and (3) authorized remedy. Bus. & Prof. Code ? 17200; Paulus v. Bob Lynch Ford, Inc. (2006) 139 Cal.App.4th 659, 676. Generally, an unfair competition claim must be supported by a predicate offense. See, e.g., Aleksick v. 7-Eleven, Inc. (2012) 205 Cal.App.4th 1176; Yanting Zhang v. Superior Court (2013) 57 Cal.4th 364.
Here, the complaint fails to plead a predicate offense. Additionally, for the reasons stated above, the alleged conduct cannot support an unfair competition claim because the competition privilege protects defendants? alleged conduct. A-Mark Coin Co., supra, 148 Cal.App.3d at 324. Nor is there any conduct alleged that is unfair; merely attempting to show competing products falls terminally short of the threshold to sustain this theory.
Conclusion
Unless plaintiff?s counsel can, in good faith at the hearing, explain how these defects can be cured by amendment, the Court is inclined to SUSTAIN the demurrer WITHOUT LEAVE. See Maxton v. Western States Metals (2012) 203 Cal.App.4th 81, 96.
Defendants? counsel to give notice.