Myles M. Mattenson
ATTORNEY AT LAW
5550 Topanga Canyon Blvd.
Woodland Hills, California 91367
Telephone (818) 313-9060
Facsimile (818) 313-9260
In a dusty old English casebook, there is the report of the case of Lumley vs. Gye. Miss Wagner, a celebrated opera singer of the time, circa 1853, had agreed to sing exclusively for Mr. Lumley. Mr. Gye, however, with knowledge of the contractual arrangement, persuaded her to refuse to perform. The court determined that Mr. Lumley was entitled to sue Mr. Gye for willfully inducing the breach of contract. Since that time, the principle of this case has been gradually extended to permit lawsuits for inducing the breach of any type of contract, and, in fact, even for inducing the refusal to do business where no specific contractual agreement exists. Actions can thus presently be maintained for intentionally diverting business from another under circumstances that are not within the privilege of fair competition. In one interesting situation, a defendant published credit reports with items pirated from a recognized publisher of credit material. The court noted that the defendants "took material acquired by plaintiff as a result of organization and the expenditure of labor, skill and money and appropriated it without expense on their part, offering it to their subscribers as their own, and diverting customers from plaintiff to themselves." A judgment for the plaintiff was upheld on appeal. [108 Cal.App.2nd 394] In another situation, a CPA discharged from a nationally recognized firm attempted to discredit his former employer's handling of a tax client because he differed in certain accounting decisions made by the firm. A California court enjoined the interference with what was described as "advantageous contractual relations of the firm". [247 Cal.App.2d 128] An action for interference with prospective business advantage was held to exist against an individual who unfairly induced unrelated creditors to demand immediate payment, and to refuse to extend further credit to the debtor, in order to destroy the debtor's business. [119 Cal.App.2d 738] In another matter, a significant customer of a delivery service informed prospective purchasers that its delivery contract, which was oral, would be terminated if the delivery service was sold. One of the offers the delivery service received was for approximately $200,000, but was conditioned on the continued business of the customer. The court determined that the customer's statement was made solely for the purpose of frustrating the proposed sale so as to allow the customer to purchase the business for a small percentage of the originally proposed price. The court stated that the customer "succeeded it its scheme. The company was sold to [the customer] for about $17,400 instead of its true market value of $200,000, and as a result [the owner of the delivery service] suffered damages in the sum of $183,000." A California court held that a cause of action was stated for interference with prospective economic advantage against the customer. [79 Cal.App.3d 13] As one court in California has observed: "Simply stated, the marketplace should not be immune from ethics." [116 Cal.App.3d 111]
[This column is intended to provide general information only and is not intended to provide specific legal advice; if you have a specific question regarding the law, you should contact an attorney of your choice. Suggestions for topics to be discussed in this column are welcome.] Reprinted from New Era Magazine Myles M. Mattenson © 1995-2002