CACI No. 2204. Negligent Interference With Prospective Economic Relations

Judicial Council of California Civil Jury Instructions (2020 edition)

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2204.Negligent Interference With Prospective Economic
Relations
[Name of plaintiff] claims that [name of defendant] negligently interfered
with a relationship between [him/her/nonbinary pronoun/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/nonbinary pronoun/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
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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 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.” (Redfearn v. Trader Joe’s
Co. (2018) 20 Cal.App.5th 989, 1005 [230 Cal.Rptr.3d 98].)
• “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
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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.)
• “The fact that the defendant’s conduct was independently wrongful is an element
of the interference cause of action itself. In addition, the wrongful interfering act
can be independently tortious only as to a third party; it need not be
independently wrongful as to the plaintiff. Accordingly, . . . to state a cause of
action for intentional or negligent interference with prospective economic
advantage, it is not necessary to also plead a separate, stand-alone tort cause of
action.” (Redfearn,supra, 20 Cal.App.5th at p. 1006, 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
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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
9 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,
§ 565.135 (Matthew Bender)
12 California Points and Authorities, Ch. 122, Interference, § 122.70 (Matthew
Bender)
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