Negligent Interference with Prospective Economic Advantage
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Nakase Wade law firm represents companies, businesses, and employers – exclusively.
We invite your attention to our disclaimer.
A cause of action exists for negligent interference with another’s prospective business advantage if the defendant acts unreasonably and wrongfully, albeit not intentionally, so as to foreseeably disrupt a business advantage of another with whom the defendant has a special relationship. (Ixchel Pharma, LLC v. Biogen, Inc. (2020) 9 Cal.5th 1130, 1141.)
“The difference between intentional interference and negligent interference with prospective economic advantage relates to the defendant’s intent.” (Crown Imports, LLC v. Superior Court (2014) 223 Cal.App.4th 1395, 1404 n. 10.)
“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.)
Elements
“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.)
Paula claims that Daniel negligently interfered with a relationship between her and Joe’s Pizza Place that probably would have resulted in an economic benefit to Paula. To establish this claim, Paula must prove:
To state a cause of action for intentional interference with prospective economic advantage, “the plaintiff must allege that the defendant engaged in an independently wrongful act.” (Ixchel Pharma, LLC v. Biogen, Inc. (2020) 9 Cal.5th 1130, 1148 disapproving of Redfearn v. Trader Joe’s Co. (2018) 20 Cal.App.5th 989, 1006.)
The acts by which a defendant interfered must be independently wrongful. (Reeves v. Hanlon (2004) 33 Cal.4th 1140, 1152; see also San Jose Const., Inc. v. S.B.C.C., Inc. (2007) 155 Cal.App.4th 1528, 1544-1545 [an act must be wrongful by some legal measure, not merely the product of improper but lawful purpose or motive].)
The plaintiff must allege the existence of either a contractual relationship or a prospective business relationship advantageous to the plaintiff. (Baldwin v. Marina City Props., Inc. (1978) 79 Cal.App.3d 393, 407.)
A restaurant could have a prospective advantageous business relationship with potential restaurant clients. (See, e.g., J’Aire Corp. v. Gregory (1979) 24 Cal.3d 799, 808.)
The plaintiff could not prevail in his action for negligent interference with a prospective business advantage because the plaintiff did not allege a continuing relationship. (Baldwin v. Marina City Props., Inc. (1978) 79 Cal.App.3d 393, 407.)
The defendant must have knowledge of the business relationship and knowledge (actual or construed) that the relationship would be disrupted if the defendant failed to act with reasonable care. (Redfearn v. Trader Joe’s Co. (2018) 20 Cal.App.5th 989, 1005.)
The defendant must owe a duty of care to the plaintiff. (Lange v. TIG Ins. Co. (1998) 68 Cal. App. 4th 1179, 1187 (citing LiMandri v. Judkins, 52 Cal. App. 4th 326, 348). The existence of a duty of care is a question of law for the court. (Ott v. Alfa-Laval Agric., Inc. (1995) 31 Cal.App.4th 1439, 1448, 1449.) 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 Ins. Co. (1998) 68 Cal.App.4th 1179, 1187.)
“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.) A duty of care exists if there is a special relationship between plaintiff and the defendant. (Id. at p. 808.)
A special relationship between plaintiff and defendant can be established by weighing the following factors:
(J’Aire Corp. v. Gregory (1979) 24 Cal.3d 799, 808.)
Examples
No “special relationship” existed between the manufacturer of a component in defective pipes and the homeowners who purchased pipes made with that component because manufacturer’s actions were intended to affect the plaintiff homeowners in the same manner as it intended to affect all homeowners with such pipes. (Zamora v. Shell Oil Co. (1997) 55 Cal.App.4th 204, 212.)
No “special relationship” existed between the manufacturer of a milking system and a farmer who owned the system because it was determined that the milking system was intended to affect the plaintiffs in the same way as all retail buyers. (Ott v. Alfa-Laval Agric., Inc. (1995) 31 Cal.App.4th 1439, 1455, 1456.)
Under the six-part J’Aire duty test, dairy farm owners could not recover economic damages allegedly caused by a milking machine manufacturer when they failed to show a special relationship with the manufacturer or that their injury (decline in milk production due to the machines) was reasonably foreseeable. (Ott v. Alfa-Laval Agric., Inc. (1995) 31 Cal.App.4th 1439, 1455, 1456.)
A special relationship existed between a chemical company and the packager and shipper of its products. (North Am. Chem. Co. v. Superior Court (1997) 59 Cal.App.4th 764, 781-87 [company recovered economic damages that it had paid to settle a customer’s claim that arose from contaminated products].)
The plaintiff must allege that the defendant wrongfully interfered with the relationship. (Baldwin v. Marina City Props., Inc. (1978) 79 Cal.App.3d 393, 407.)
The wrongful conduct must be independent of the interference itself. (Lange v. TIG Ins. Co. (1998) 68 Cal. App. 4th 1179, 1189 citing Della Penna v. Toyota Motor Sales, U.S.A. Inc. (1995) 11 Cal. 4th 376.)
A cause of action for negligent interference with prospective business advantage requires the plaintiff to show that the defendant acted unreasonably and wrongfully, even if not intentionally, so as to foreseeably disrupt the plaintiff’s business advantage. (J’Aire Corp. v. Gregory (1979) 24 Cal.3d 799, 808 [defendant contractor wrongfully interfered with plaintiff’s restaurant business by negligently failing to complete renovation contract in reasonable amount of time].)
The defendant must have “proximately caused plaintiff’s injury and damage by interfering with the relationship, causing a business loss.” (Baldwin v. Marina City Props., Inc. (1978) 79 Cal.App.3d 393, 407.)
There is no recovery where damages are wholly speculative, nor where the injury is part of plaintiff’s ordinary business risk. (J’Aire Corp. v. Gregory (1979) 24 Cal.3d 799, 808.)
Economic damages are recoverable, despite the absence of physical injury or property damage, if there exists a special relationship between the parties. (Fieldstone Co. v. Briggs Plumbing Prods., Inc. (1997) 54 Cal.App.4th 357, 367 citing J’Aire Corp. v. Gregory (1997) 24 Cal.3d 799, 806, 808.)
The statute of limitations is two years. (Cal. Civ. Proc. Code, § 339, subd. (1)
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