California Civil Jury Instructions (CACI)

2204. Negligent Interference With Prospective Economic Relations

[Name of plaintiff] claims that [name of defendant] negligently interfered with a relationship between [him/her/it] and [name of third party] that probably would have resulted in an economic benefit to [name of plaintiff]. To establish this claim, [name of plaintiff] must prove all of the following:

1. That [name of plaintiff] and [name of third party] were in an economic relationship that probably would have resulted in a future economic benefit to [name of plaintiff];

2. That [name of defendant] knew or should have known of this relationship;

3. That [name of defendant] knew or should have known that this relationship would be disrupted if [he/she/it] failed to act with reasonable care;

4. That [name of defendant] failed to act with reasonable care;

5. That [name of defendant] engaged in wrongful conduct through [insert grounds for wrongfulness, e.g., breach of contract with another, misrepresentation, fraud, violation of statute];

6. That the relationship was disrupted;

7. That [name of plaintiff] was harmed; and

8. That [name of defendant]’s wrongful conduct was a substantial factor in causing [name of plaintiff]’s harm.

New September 2003

Directions for Use

Regarding the fifth element, the judge must specifically state for the jury the conduct that the judge has determined as a matter of law would satisfy the “wrongful conduct” standard. This conduct must fall outside the privilege of fair competition. (PMC, Inc. v. Saban Entertainment, Inc. (1996) 45 Cal.App.4th 579, 603 [52 Cal.Rptr.2d 877]; Della Penna v. Toyota Motor Sales, U.S.A., Inc. (1995) 11 Cal.4th 376, 393 [45 Cal.Rptr.2d 436, 902 P.2d 740].) The jury must then decide whether the defendant engaged in the conduct as defined by the judge. If the conduct is tortious, judge should instruct on the elements of the tort.

Sources and Authority

  • “The tort of intentional or negligent interference with prospective economic advantage imposes liability for improper methods of disrupting or diverting the business relationship of another which fall outside the boundaries of fair competition.” (Settimo Associates v. Environ Systems, Inc. (1993) 14 Cal.App.4th 842, 845 [17 Cal.Rptr.2d 757], internal citation omitted.)
  • “The tort of negligent interference with prospective economic advantage is established where a plaintiff demonstrates that (1) an economic relationship existed between the plaintiff and a third party which contained a reasonably probable future economic benefit or advantage to plaintiff; (2) the defendant knew of the existence of the relationship and was aware or should have been aware that if it did not act with due care its actions would interfere with this relationship and cause plaintiff to lose in whole or in part the probable future economic benefit or advantage of the relationship; (3) the defendant was negligent; and (4) such negligence caused damage to plaintiff in that the relationship was actually interfered with or disrupted and plaintiff lost in whole or in part the economic benefits or advantage reasonably expected from the relationship.” (North American Chemical Co. v. Superior Court (1997) 59 Cal.App.4th 764, 786 [69 Cal.Rptr.2d 466].)
  • “ ‘The tort of negligent interference with economic relationship arises only when the defendant owes the plaintiff a duty of care.’ ” (Limandri v. Judkins (1997) 52 Cal.App.4th 326, 348 [60 Cal.Rptr.2d 539], internal citation omitted.)
  • “Where a special relationship exists between the parties, a plaintiff may recover for loss of expected economic advantage through the negligent performance of a contract although the parties were not in contractual privity.” (J’Aire Corp. v. Gregory (1979) 24 Cal.3d 799, 804 [157 Cal.Rptr. 407, 598 P.2d 60].)
  • The trial court should instruct the jury on the “independently wrongful” element of the tort of negligent interference with prospective economic advantage. (National Medical Transportation Network v. Deloitte & Touche (1998) 62 Cal.App.4th 412, 440 [72 Cal.Rptr.2d 720].)
  • “Commonly included among improper means are actions which are independently actionable, violations of federal or state law or unethical business practices, e.g., violence, misrepresentation, unfounded litigation, defamation, trade libel or trade mark infringement.” (PMC, Inc., supra, 45 Cal.App.4th at p. 603, internal citation omitted.)
  • “While the trial court and [defendant] are correct that a defendant incurs liability for interfering with another’s prospective economic advantage only if the defendant’s conduct was independently wrongful, we have been directed to no California authority, and have found none, for the trial court’s conclusion that the wrongful conduct must be intentional or willful. The defendant’s conduct must ‘fall outside the boundaries of fair competition’. . . , but negligent misconduct or the violation of a statutory obligation suffice. The approved CACI No. 2204 does not indicate otherwise and, in fact, indicates that either a misrepresentation or ‘violation of statute’ is sufficient.” (Venhaus v. Shultz (2007) 155 Cal.App.4th 1072, 1079—1080 [66 Cal.Rptr.3d 432], internal citations omitted.)
  • Notably, one of “[t]he criteria for establishing [the existence of] a duty of care is the ‘blameworthiness’ of the defendant’s conduct.” (Lange v. TIG Insurance Co. (1999) 68 Cal.App.4th 1179, 1187 [81 Cal.Rptr.2d 39].) The Lange court stated that in a negligent interference case “a defendant’s conduct is blameworthy only if it was independently wrongful apart from the interference itself.” (Ibid.) Thus, the “independently wrongful” element may, in effect, be decided by the judge in the course of determining whether a duty of care was owed.
  • There is currently no cause of action for negligent interference with contractual relations (see Fifield Manor v. Finston (1960) 54 Cal.2d 632, 636—637 [7 Cal.Rptr. 377, 354 P.2d 1073]): “Although the continuing validity of the so-called ‘Fifield rule’ is questionable in light of the California Supreme Court’s recognition in J’Aire of a cause of action for negligent interference with prospective economic advantage, the Supreme Court has yet to disapprove Fifield.” (LiMandri, supra, 52 Cal.App.4th at p. 349.)
  • “Under the privilege of free competition, a competitor is free to divert business to himself as long as he uses fair and reasonable means. Thus, the plaintiff must present facts indicating the defendant’s interference is somehow wrongful—i.e., based on facts that take the defendant’s actions out of the realm of legitimate business transactions.” (Tri-Growth Centre City, Ltd. v. Silldorf, Burdman, Duignan & Eisenberg (1989) 216 Cal.App.3d 1139, 1153—1154 [265 Cal.Rptr. 330], internal citations omitted.)
  • “Since the crux of the competition privilege is that one can interfere with a competitor’s prospective contractual relationship with a third party as long as the interfering conduct is not independently wrongful (i.e., wrongful apart from the fact of the interference itself), Della Penna’s requirement that a plaintiff plead and prove such wrongful conduct in order to recover for intentional interference with prospective economic advantage has resulted in a shift of burden of proof. It is now the plaintiff’s burden to prove, as an element of the cause of action itself, that the defendant’s conduct was independently wrongful and, therefore, was not privileged rather than the defendant’s burden to prove, as an affirmative defense, that it’s [sic] conduct was not independently wrongful and therefore was privileged.” (Bed, Bath & Beyond of La Jolla, Inc. v. La Jolla Village Square Venture Partners (1997) 52 Cal.App.4th 867, 881 [60 Cal.Rptr.2d 830].)
  • There are other privileges that a defendant could assert in appropriate cases, such as the “manager’s privilege.” (See Halvorsen v. Aramark Uniform Services, Inc. (1998) 65 Cal.App.4th 1383, 1391—1392 [77 Cal.Rptr.2d 383].)

Secondary Sources

5 Witkin, Summary of California Law (10th ed. 2005) Torts, §§ 751—754

3 Levy et al., California Torts, Ch. 40, Fraud and Deceit and Other Business Torts, § 40.104 (Matthew Bender)

10 California Forms of Pleading and Practice, Ch. 103, Brokers, § 103.33 (Matthew Bender)

49 California Forms of Pleading and Practice, Ch. 565, Unfair Competition, § 565.133 (Matthew Bender)

12 California Points and Authorities, Ch. 122, Interference, § 122.36 (Matthew Bender)