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(A version of this article appears in the California
Construction Law Reporter, published by the West Group.)
By James E. Acret
Plaintiff
represented a radar manufacturer in negotiations for a contract
with the Republic of Korea and stood to receive a commission
of more than $30 million if its client's bid was accepted.
Plaintiff contended that its client's bid was lower and
its equipment superior but that it was not awarded the contract
because Loral Corporation bribed South Korean officials.
In
its complaint, plaintiff alleged conspiracy to interfere
with prospective economic advantage, intentional interference
with prospective economic advantage and unfair competition
under Business and Professions Code §17200, on which
claim plaintiff sought disgorgement of profits. The trial
court sustained a demurrer without leave to amend. The Court
of Appeal reversed.
The
Supreme Court granted review on two issues: 1) whether
disgorgement of profits is an available remedy under the
unfair competition statute and 2) whether the tort
of intentional interference with prospective economic advantage
requires the plaintiff to plead a specific intent to interfere
with plaintiff's business expectancy. The Supreme Court
held that under the unfair competition statute, disgorgement
of money obtained through an unfair business practice may
be compelled only to the extent it constitutes restitution
of money taken from the plaintiff. Korea Supply Co. v.
Lockheed Martin Corp., 29 Cal.4th 1134, 131 Cal. Rptr.
2d 29, 2003 DJDAR 2291 (2003).
The
Supreme Court held that the tort of intentional interference
with prospective economic advantage does not require a plaintiff
to plead that the defendant acted with a specific intent
to disrupt the plaintiff's advantage. It is sufficient to
plead that the defendant knew that interference was certain
or substantially certain to occur as a result of its action,
as provided in Restatement (Second) Torts, §766B.
The
court wrote that it is important to distinguish between
two torts. Intentional interference with contract is a wrong
in itself. Intentional interference with prospective economic
advantage is established only when the act is independently
wrong or unlawful. Here, the requirement is met by allegations
of bribery and offered sexual favors because they are made
unlawful under the Foreign Corrupt Practices Act (15 USC
§78dd). The allegations of the complaint show that
defendant acted with knowledge of the commission relationship
between plaintiff and its client. Therefore, plaintiff alleged
that defendant acted knowing that interference was certain
or substantially certain to occur as a result of its action.
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To learn more about Howrey's Construction Practice Group, click here. For more information about books and other legal materials written by James Acret, click here and enter "Acret" in the site search engine. To learn more about topics covered in this article, contact Paul Berning at 415-848-4996 or at paulberning@howrey.com.
©2003 Howrey LLP
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