California Civil Jury Instructions (CACI)

3407. Horizontal and Vertical Restraints - Agreement Between Company and Its Employee

[Name of plaintiff] claims that [name of defendant's agent/employee/ officer], who is an [agent/employee/officer] of [name of defendant], had an agreement with [name of defendant]. You may find that [name of defendant's agent/employee/officer] and [name of defendant] had the required agreement only if you decide that [he/she] had a separate economic interest from [name of defendant] and acted in [his/her] own separate interest.

Directions for Use

This instruction is intended to clarify the circumstances under which an employee, agent, or officer can form an unlawful agreement. The parties may wish to develop an example to illuminate the issue, such as an employee running a side business that may combine with the business of his employer to restrain trade.

Sources and Authority

"[T]he Act prohibits the combination of resources of two or more independent interests for the purpose of restraining commerce and preventing market competition in the variety of ways listed in the statute." (Lowell v. Mother's Cake and Cookie Co. (1978) 79 Cal.App.3d 13, 23 [144 Cal.Rptr. 664], internal citation omitted.)

"[A] corporation cannot conspire with itself or its agents for purposes of the antitrust laws." (Kolling v. Dow Jones and Co., Inc. (1982) 137 Cal.App.3d 709, 720 [187 Cal.Rptr. 797], internal citation omitted.)

"It is also held that an individual acting alone through his agent or a corporation acting alone through its officers is not a combination in restraint of trade proscribed by the statute. The rationale of these decisions is that the acts of the agents or employees in the operation of the business are the acts of the principal. . . . We are of the opinion that the language of section 16720 of the Business and Professions Code contemplates concert of action by separate individuals or entities maintaining separate and independent interests . . . ." (Bondi v. Jewels by Edwar, Ltd. (1968) 267 Cal.App.2d 672, 677-678 [73 Cal.Rptr. 494], internal citations omitted.)

"[I]t is well settled that a complaint for antitrust violations which fails to allege such concerted action by separate entities maintaining separate and independent interests is subject to demurrer." (G.H.I.I. v. MTS, Inc. (1983) 147 Cal.App.3d 256, 266 [195 Cal.Rptr. 211], internal citations omitted.)

"[Under the Sherman Act,] [t]he officers of a single firm are not separate economic actors pursuing separate economic interests, so agreements among them do not suddenly bring together economic power that was previously pursuing divergent goals. Coordination within a firm is as likely to result from an effort to compete as from an effort to stifle competition. In the marketplace, such coordination may be necessary if a business enterprise is to compete effectively. For these reasons, officers or employees of the same firm do not provide the plurality of actors imperative for a § 1 conspiracy." (Copperweld Corp. v. Independence Tube Corp. (1984) 467 U.S. 752, 769 [104 S.Ct. 2731, 81 L.Ed.2d 628], footnote omitted.)

"[M]any courts have created an exception for corporate officers acting on their own behalf." (Copperweld Corp., supra, 467 U.S. at p. 769, fn. 15.)

"We . . . need not reach the broader issue extensively argued in the amicus brief, i.e., whether the Copperweld rule would apply to the Cartwright Act when the conspiracy or combination in restraint of trade is purely intra-enterprise and there is no coerced or unwitting compliance by the victim in the forbidden activity." (MacManus v. A. E. Realty Partners (1987) 195 Cal.App.3d 1106, 1111, fn. 4 [241 Cal.Rptr. 315].)

Secondary Sources

1 Witkin, Summary of California Law (9th ed. 1987) Contracts, §§ 575- 590

2 Antitrust and Trade Regulation Law Section, State Bar of California, California Antitrust Law (2d ed. 2001), § 9.04B

(New September 2003)