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Supreme Court Holds Interference Must Be Wrongful

California recognizes two different torts involving interference with economic relations - interference with performance of a contract and interference with prospective economic advantage.  Originally California courts treated these two torts as essentially the same, the the only difference being that interference with contractual relations required the existence of a binding contract.  In 1995, however, the Supreme Court held that a plaintiff pursuing a claim for interference with a prospective contractual or economic relationship had to plead that the defendant's conduct was wrongful.  Della Penna v. Toyota Motor Sales U.S.A., Inc., 11 Cal. 4th 376 (1995).  

Contracts that are terminable at-will occupy a sort of middle estate between these two torts, leading to the question of whether a plaintiff pursuing a claim for tortious interference with an at-will contract must plead that the interference was independently wrongful.  Yesterday, the California Supreme Court held that tortious interference with an at-will contract does require independent wrongfulness. Ixchel Pharma, LLC v. Biogen, Inc., 2020 Cal. LEXIS 4876.

Although the Court recognized that in an at-will contract the parties have more of an expectation of continuity of the relationship than when no contract exists, it found that there is no legal basis in either case to expect continuity from the perspective of a third-party.  The Court also found that legitimate business competition could be chilled if independent wrongfulness is not required.  Finally, the Court disapproved of two earlier decisions of the Court of Appeal to the extent that they are inconsistent - Redfearn v. Trader Joe's Co., 20 Cal. App. 5th 989 (2018) and Popescu v. Apple, Inc., 1 Cal. App. 5th 39 (2016).

© 2010-2020 Allen Matkins Leck Gamble Mallory & Natsis LLP National Law Review, Volume X, Number 218

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About this Author

Keith Paul Bishop, Corporate Transactions Lawyer, finance securities attorney, Allen Matkins Law Firm
Partner

Keith Paul Bishop is a partner in Allen Matkins' Corporate and Securities practice group, and works out of the Orange County office. He represents clients in a wide range of corporate transactions, including public and private securities offerings of debt and equity, mergers and acquisitions, proxy contests and tender offers, corporate governance matters and federal and state securities laws (including the Sarbanes-Oxley Act of 2002 and the Dodd-Frank Act), investment adviser, financial services regulation, and California administrative law. He regularly advises clients...

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