PACIFIC GAS AND ELECTRIC COMPANY v. BEAR STEARNS COMPANY

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Court of Appeal, First District, Division 1, California.

PACIFIC GAS AND ELECTRIC COMPANY, Plaintiff and Appellant, v. BEAR STEARNS & COMPANY, the Bear Stearns Companies, Inc., Bear Stearns & Co., Inc., Defendants and Respondents.

No. AO35849.

Decided: December 18, 1987

Howard V. Golub, Douglas A. Oglesby, Shirley A. Sanderson, Randall J. Litteneker, Pacific Gas and Elec. Co., Charles A. Ferguson, San Francisco, for plaintiff and appellant. Claire H. Greve, Greve, Clifford, Diepenbrock & Paras, Sacramento, Thomas W. Evans, Audrey Strauss, Mudge Rose Guthrie Alexander & Ferdon, New York City, for defendants and respondents.

Power company and county agency entered into a long-term contract for the purchase and sale of hydroelectric power.   The county agency decided to terminate the contract after receiving advice and aid from an investment banking firm.   Power company brought this action against the investment banking firm for interfering with the contract.   The trial court sustained the investment banking firm's demurrer.

The order of the trial court sustaining the demurrer and dismissing the action is reversed.

Statement of Facts 1

In 1963, plaintiff and appellant Pacific Gas and Electric Company (hereafter, PG & E) entered into a contract (hereafter, power contract) with Placer County Water Agency (hereafter, Agency) for the purchase of hydroelectric power generated by Agency's Middle Fork American River Project.   The contract was to terminate in the year 2013, or at the end of the year in which Agency retired bonds issued to finance the construction of the project.   Agency issued non-callable bonds that did not mature until 2013.

As energy prices rose during the 1970's, the power contract became extremely valuable to PG & E.   The price PG & E paid for the hydroelectric power pursuant to the contract, was much lower than the cost of energy from other sources.   Agency realized it could reap greater profits if it could terminate the contract, but believed it had no right to do so.

Defendant and Respondent Bear Stearns 2 learned of the power contract sometime in 1982.   Bear Stearns offered to assist Agency in an effort to terminate the contract, in exchange for a share of the profits and the right to underwrite any new securities issued by Agency.   In May, 1983, Bear Stearns and Agency entered into a contract (hereafter, contingent fee contract) in which Bear Stearns agreed to fund legal, engineering, and marketing studies on the feasibility of terminating the power contract, in return for 15 percent of any increase in Agency's revenues above $2,500,000 for 20 years, the right to underwrite any securities issued in connection with the sale of power to a new purchaser, and reimbursement of its out-of-pocket expenses.

Bear Stearns concluded the power contract could legally and profitably be terminated, and in November, 1983, persuaded Agency to proceed with plans to terminate the contract.   In a supplement to the contingent fee contract, Bear Stearns agreed to pay the legal fees of the law firm retained to litigate the matter.   Agency wanted its regular counsel to participate in the litigation, so Bear Stearns agreed to pay one-half of the fees charged by that firm too.

In late 1984, Agency demanded arbitration on the matter.   That demand was apparently withdrawn, and in December, 1985, PG & E filed a complaint in San Diego County Superior Court (hereafter, San Diego action) asking for declaratory relief and an injunction to stop Agency's attempt to terminate the power contract.   The trial court entered judgment on the pleadings in favor of Agency in that action, but the Court of Appeal reversed the judgment.   That action is still pending.

Procedural History

PG & E filed a complaint in San Francisco County Superior Court on September 24, 1985, seeking to enjoin Bear Stearns from assisting Agency's efforts to terminate the power contract.   PG & E also sought damages from Bear Stearns.

The trial court sustained Bear Stearns' demurrer to the complaint, with leave to amend.   PG & E filed its first amended complaint and again the trial court sustained Bear Stearns' demurrer.

PG & E filed its second amended complaint on April 11, 1986.   The complaint stated three causes of action:  (1) Intentional interference with contractual relations, (2) intentional interference with business (economic) advantage;  and, (3) attempted inducement of breach of contract.

Bear Stearns demurred.

The trial court sustained the demurrer on five separate grounds:  (1) The absence of actual interference with the power contract by Bear Stearns;  (2) the lack of damages resulting from interference by Bear Stearns;  (3) PG & E's failure adequately to allege inducement by Bear Stearns;  (4) a financial advisor's privilege;  and, (5) a privilege pursuant to Civil Code section 47, subdivision (2).   The trial court dismissed the action.

PG & E appeals from the order sustaining the demurrer and dismissing the action.

Standard of Review

“The function of a demurrer is to test the sufficiency of a plaintiff's pleading by raising questions of law.  [Citation.]  [¶] The allegations in the complaint must be regarded as true [citation], and are to be liberally construed with a view to substantial justice between the parties.   [Citation.]”  (Rader Co. v. Stone (1986) 178 Cal.App.3d 10, 20, 223 Cal.Rptr. 806.)  “Unless the complaint shows on its face that it is incapable of amendment, denial of leave will constitute an abuse of discretion.   [Citation.]”  (Ibid.)  [¶] “On appeal, the court is not concerned with a party's possible difficulty or inability in proving the allegations of the complaint․”  (Ibid.—emphasis in original.)

Interference with Business Relationships

The tort of interference with contractual relations appears to be merely a “species of the broader tort of intentional interference with prospective economic advantage․”  (Buckaloo v. Johnson (1975) 14 Cal.3d 815, 823, 122 Cal.Rptr. 745, 537 P.2d 865.)   The difference is that the former requires the existence of a binding contract.  (Ibid.)  Since a legally binding contract exists in this case, a cause of action for either tort may be stated, if all the necessary elements are present.

 The elements of the cause of action for intentional interference with contractual relations are:  (1) A valid and existing contract;  (2) defendant's knowledge of the contract and an intent to induce the breach of that contract;  (3) breach of the contract by the contacting party;  (4) caused by defendant's wrongful or unjustified conduct;  and, (5) damages.  (Dryden v. Tri–Valley Growers (1977) 65 Cal.App.3d 990, 995, 135 Cal.Rptr. 720.)

Bear Stearns contends that PG & E has not suffered any damages and, more importantly, the contract has not been and will never be breached.   PG & E does not and cannot allege that Agency will not perform its side of the contract in the event PG & E ultimately obtains a favorable judgment in the San Diego action.

 Bear Stearns touches on an interesting point:  Will a cause of action for intentional interference with contractual relations lie when the defendant induces the contracting party legally to evade an existing contract? 3

A reading of the elements alone, would lead one to believe a “breach” of the contract is necessary.   However, several California cases and the Restatement have concluded a defendant can be held liable for interfering with a contract that is terminable at will.  (Kozlowsky v. Westminster Nat. Bank (1970) 6 Cal.App.3d 593, 598, 86 Cal.Rptr. 52;  Herron v. State Farm Mutual Ins. Co. (1961) 56 Cal.2d 202, 206, 14 Cal.Rptr. 294, 363 P.2d 310;  Rest.2d Torts, § 766, com. g.)

Since interference with contractual relations is just a “species” of the tort of interference with prospective economic advantage, this apparent contradiction is not as important as it seems.   The elements of the tort of intentional interference with prospective economic advantage are:  “(1) an economic relationship between plaintiff and some third party, with the probability of future economic benefit to plaintiff;  (2) the defendant's knowledge of the relationship;  (3) intentional acts on the part of defendant designed to disrupt the relationship;  (4) actual disruption of the relationship;  and, (5) economic harm to the plaintiff proximately caused by the acts of the defendant.”  (Youst v. Longo (1987) 43 Cal.3d 64, 71, fn. 6, 233 Cal.Rptr. 294, 729 P.2d 728, citing Buckaloo v. Johnson, supra, 14 Cal.3d at p. 827, 122 Cal.Rptr. 745, 537 P.2d 865.)

Bear Stearns concedes that if the power contract is legally terminated (i.e., if the San Diego action is resolved in Agency's favor), PG & E will have suffered damages, and a cause of action for interference with prospective economic advantage might exist.4

Improper interference with an existing contract that can legally be avoided, probably fits more easily within the rubric of interference with prospective economic advantage.5  Since the remedies are the same (3 Levy, Golden, & Sacks, California Torts (1987) § 40.107[1], p. 40–149.), the distinction between the two is really irrelevant in the present case.   The fact that Agency does not intend to breach the contract clearly does not bar the cause of action for interference with prospective economic advantage;  and, since one can be held liable for interfering with a contract that is terminable at will, that fact should not bar the cause of action for interference with contractual relations.6

Injunctive Relief

 PG & E must still overcome Bear Stearns' assertion that it has not suffered any damages.   PG & E states that it need not allege existing damages when it seeks an injunction to prevent threatened damages.

Bear Stearns accurately cites authority for the proposition that an injunction is merely a remedy, available to a plaintiff possessing a cause of action.   (Citing Williams v. Southern Pacific R.R. Co. (1907) 150 Cal. 624, 628, 89 P. 599;  Camp v. Mendocino County Board of Supervisors (1981) 123 Cal.App.3d 334, 355–356, 176 Cal.Rptr. 620;  5 Witken, Cal.Procedure (3d ed. 1985) Pleading § 774, p. 218.)   Therefore, reasons Bear Stearns, PG & E cannot get an injunction until it suffers damages, an essential element of both causes of action.

Bear Stearns' theory would create a “catch 22” situation, in which a plaintiff could not stop threatened harm until some harm was suffered.   As PG & E suggests, acceptance of that argument would destroy the remedy of injunction.   “․ [I]njunctive relief lies to prevent threatened injury or injury from past acts which is likely to recur.  [Citation.]”  (Ernst & Ernst v. Carlson (1966) 247 Cal.App.2d 125, 128, 55 Cal.Rptr. 626;  see also Knox v. Streatfield (1978) 79 Cal.App.3d 565, 573, 145 Cal.Rptr. 39;  Anderson v. Fay Improvement Co. (1955) 134 Cal.App.2d 738, 744, 286 P.2d 513.)   PG & E may obtain injunctive relief to prevent acts by Bear Stearns that threaten to harm PG & E's interests.7

Recovery of Expenses of San Diego Litigation

PG & E argues that not only does its complaint sufficiently plead a set of facts entitling it to injunctive relief, but that the complaint also sufficiently alleges actual damages—the expenses incurred in defending the contract.   PG & E is correct.

 Under the “tort of another” (or “third party tort”) doctrine, a plaintiff may recover the expenses (including attorney's fees) incurred in bringing an action against a third party, from a defendant whose tortious conduct required the plaintiff to act to protect his or her interests.   (Gray v. Don Miller & Associates, Inc. (1984) 35 Cal.3d 498, 505, 508, 198 Cal.Rptr. 551, 674 P.2d 253;  Prentice v. North Amer. Title Guar. Corp. (1963) 59 Cal.2d 618, 30 Cal.Rptr. 821, 381 P.2d 645;  Rest.2d Torts, § 914, subd. (2).) 8  PG & E alleged it incurred legal and other expenses in defending the contract, as a result of Bear Stearns' conduct.   Accepting that allegation as true (Rader Co. v. Stone, supra, 178 Cal.App.3d at p. 20, 223 Cal.Rptr. 806.), PG & E has suffered cognizable damages.

Statute of Limitations

Bear Stearns contends that if PG & E does have a cause of action, it is barred by a two-year statute of limitations applicable to this type of action.   (Citing Code Civ.Proc., § 339, subd. (1);  Kiang v. Strycula (1965) 231 Cal.App.2d 809, 811–812, 42 Cal.Rptr. 338.)   Bear Stearns argues the statue of limitations began to run in May, 1983, when Agency and it entered into the contingent fee agreement.   PG & E filed its original complaint in September, 1985.

Bear Stearns admits it did not raise this issue in the trial court, but it maintains the issue presents a question of law, resolvable on appeal.  (Citing Garcia v. Los Angeles Unified School Dist. (1985) 173 Cal.App.3d 701, 709, 219 Cal.Rptr. 544.)

 As PG & E notes, the injury entitling it to a legal remedy did not occur until December, 1984, when the action to determine the parties' rights pursuant to the power contract commenced.   The statute of limitations begins to run when a plaintiff has suffered actual harm, entitling plaintiff to a legal remedy.  (Davies v. Krasna (1975) 14 Cal.3d 502, 513, 121 Cal.Rptr. 705, 535 P.2d 1161.)   PG & E might have be able to obtain injunctive relief prior to the commencement of the San Diego action, but PG & E suffered no “appreciable harm” until December, 1984.  (Budd v. Nixen (1971) 6 Cal.3d 195, 200, 98 Cal.Rptr. 849, 491 P.2d 433.)   The statute of limitations does not bar this action.

Inducement Allegations

 As a separate ground for sustaining the demurrer the trial court found PG & E failed “to adequately allege inducement by [Bear Stearns]․”  PG & E contends that it more than adequately alleged inducement.   PG & E believes the trial court improperly resolved factual issues at the urging of Bear Stearns.

“In California, pleading ultimate facts of interference, such as advising, counseling and persuading termination of a contract, is sufficient to state a cause of action for interference with contract.”  (Rosenfeld, Meyer & Susman v. Cohen (1983) 146 Cal.App.3d 200, 221, 194 Cal.Rptr. 180.)   Defendant's acts must be the “moving cause” behind the termination of the contract.   (Dryden v. Tri–Valley Growers, supra, 65 Cal.App.3d at p. 997, 135 Cal.Rptr. 720.)

PG & E's allegations described the following course of conduct:  Agency considered terminating the power contract after the energy price increases of the 1970's.   However, Agency decided not to attempt to terminate the contract because of the legal, financial, and political risks involved.   Bear Stearns learned of the contract “about 1982”.   Agency was not an existing client of Bear Stearns.   In order to overcome Agency's reluctance to terminate the contract, Bear Stearns offered up to $200,000 to fund a “feasibility study”.   This study included retaining a new law firm to provide legal advice, hiring an engineering firm, and marketing the power to other utilities and government agencies.   Representatives of Bear Stearns appeared at public hearings and spoke in support of terminating the contract.   Bear Stearns agreed to pay most of the cost of litigating the matter.   Agency remained unconvinced “through most of 1983.”   Finally, in late 1984, Agency decided to demand arbitration.

It is clear that, as PG & E submits, the trial court must have looked beyond the complaint in deciding PG & E failed adequately to allege inducement.   Bear Stearns asked the trial court to take judicial notice of PG & E's complaint in the San Diego action, and the contingent fee agreement, which had been attached to PG & E's original complaint in this action.   This is permissible.   (Dryden v. Tri–Valley Growers, supra, 65 Cal.App.3d at p. 997, 135 Cal.Rptr. 720.)

According to Bear Stearns, the facts in Dryden are similar to those in this case.   The trial court in Dryden took judicial notice of the complaint filed by plaintiffs in a separate declaratory relief action.   That complaint showed that the third parties had abandoned performance of the contracts with plaintiffs, before defendant's contact with the third parties.   The court of appeal affirmed the dismissal of the action.

The PG & E complaint in the San Diego action included a quote from a resolution by the Agency's board of directors passed on February 24, 1982.   The quoted portion stated:  “MOTION was made by Director Koster, seconded by Director Horton, all directors voting aye, to authorize and direct the Board's Power Committee, legal staff, and financial advisors to continue to actively pursue legal and financial aspects of retiring all outstanding Middle Fork Project revenue bonds, Series A, of the Placer County Water Agency and terminating the Middle Fork American River Power Project Contract with P.G. & E.”

PG & E's first amended complaint alleged Bear Stearns' initial contact with Agency took place in “late 1982 or early 1983.”   PG & E revised that date to “[a]bout 1982” in its second amended complaint.   Bear Stearns asserts the quoted portion of the resolution shows Agency had decided to terminate the power contract before Bear Stearns appeared on the scene.

Unlike the the facts in Dryden, it is not absolutely clear Agency had decided unequivocally to terminate the contract prior to its contact with Bear Stearns.   At best, the quote from the minutes contradicts the allegation in PG & E's second complaint, that Agency remained unconvinced it should attempt to terminate the power contract, until after the persuasion by Bear Stearns.   As PG & E points out, Agency did not commence litigation until nearly three years later, after Bear Stearns had funded the various studies.  “[T]he allegations of the complaint must be liberally construed in favor of the pleader․”  (Rosenfeld, Meyer & Susman v. Cohen, supra, 146 Cal.App.3d at p. 222, 194 Cal.Rptr. 180.)

We agree with PG & E that its complaint adequately alleged inducement by Bear Stearns, and that the trial court improperly resolved a question of fact at this stage of the proceedings.   This ground cannot support the sustaining of the demurrer.

Privileges

A. Financial advisor's or manager's privilege

The trial court found that even if Bear Stearns had interfered with the power contract, Bear Stearns' conduct was protected by the “financial advisor's privilege.”

 Although the existence of a privilege is normally an affirmative defense which defendant must plead and prove, the facts averred in the complaint may show the existence of a privilege as a matter of law.  (Lowell v. Mother's Cake & Cookie Co. (1978) 79 Cal.App.3d 13, 18–20, 144 Cal.Rptr. 664.)   Therefore, the demurrer could be sustained in this case, if PG & E's complaint and/or the documents judicially noticed clearly establish that Bear Stearns' conduct was privileged.9

 The leading California case on the advisor's (or “manager's”) privilege is Olivet v. Frischling (1980) 104 Cal.App.3d 831, 164 Cal.Rptr. 87.   The opinion in that case discussed the circumstances under which a manager or agent can legally induce the breach of a contract between his or her principal and a third party.  “The privilege to induce an otherwise apparently tortious breach of contract is extended by law to further certain social interests deemed of sufficient importance to merit protection from liability.   Thus, a manager or agent may, with impersonal or disinterested motive, properly endeavor to protect the interests of his principal by counseling the breach of a contract with a third party which he reasonably believes to be harmful to his employer's best interests.”  (Id. at pp. 840–841, fn. omitted, 164 Cal.Rptr. 87.)

PG & E contends the facts alleged in its complaint show Bear Stearns did not act with an “impersonal or disinterested motive.”   PG & E states its complaint alleged Bear Stearns had no prior relationship with Agency and acted only to make a profit for itself.

Bear Stearns relies on the Ninth Circuit case Los Angeles Airways, Inc. v. Davis (9th Cir.1982) 687 F.2d 321.   That court held that when an advisor acts with a “ ‘mixed motive,’ i.e. with the intent to benefit his employer's interest as well as his own ․” the advisor's conduct is privileged.  (Id. at p. 328.)

The facts of this case fall somewhere in between the two extremes represented by the fact patterns of Olivet and Los Angeles Airways.   In Olivet, defendants were the directors and an attorney of a corporation who caused the corporation to break off its relations with plaintiffs.   Defendants then usurped the benefits of that relationship for themselves.   Defendant's acts did not benefit their principal.   In Los Angeles Airways, defendant was general counsel and a director for two corporations.   Defendant caused the two corporations to breach an oral agreement with plaintiff, so that the corporations could buy the assets of plaintiff's business for a lower price.   The alleged benefit to defendant was that he hoped to “promote his standing in the eyes of [his principals]․”  (Los Angeles Airways, Inc. v. Davis, supra, 687 F.2d at p. 327.)

In the present case, Bear Stearns motive was to reap substantial profits from its share of Agency's anticipated increased revenues.   Bear Stearns could not profit unless Agency profited.   Unlike the advisor in Los Angeles Airways, however, Bear Stearns had no relationship with Agency before it agreed to investigate whether the contract could be profitably terminated.   Exactly what relationship Bear Stearns and Agency have is unclear.   Bear Stearns conduct goes beyond that of a mere advisor.   It has financed nearly the entire effort to terminate the contract.

“Whether an intentional interference by a third party is justifiable depends on a balancing of the importance, social and private, of the objective advanced by the interference against the importance of the interest interfered with, considering all circumstances including the nature of the actor's conduct and the relationship between the parties.  [Citations.]”  (Herron v. State Farm Mutual Ins. Co., supra, 56 Cal.2d at p. 206, 14 Cal.Rptr. 294, 363 P.2d 310.) 10  The comments to the Restatement and California case law have stated this balancing should usually be done by a trier of fact.   (Rest.2d Torts, § 767, com. b;  Rosenfeld, Meyer & Susman v. Cohen, supra, 146 Cal.App.3d at p. 230, 194 Cal.Rptr. 180;  Lowell v. Mother's Cake & Cookie Co., supra, 79 Cal.App.3d at 22, 144 Cal.Rptr. 664.)

Bear Stearns eloquently argues its conduct was merely “classic competition.”   Though that argument remains to be evaluated by the trier of fact, we question whether this privilege should ever protect the course of conduct engaged in by Bear Stearns.   The financing of the lawsuit between Agency and PG & E would have been condemned at common law under the doctrine of champerty.  (Estate of Cohen (1944) 66 Cal.App.2d 450, 458, 152 P.2d 485.)   Although California has never adopted that doctrine (ibid.), we believe the financing, for profit, of litigation designed to terminate a long-standing legal agreement dealing with public power should not be encouraged.

The demurrer cannot be sustained based on the financial advisor's privilege.

B. Publication in a judicial proceeding

The final ground for sustaining the demurrer was the privilege found in Civil Code section 47, subdivision 2.  Section 47, subdivision 2, provides in relevant part:  “A privileged publication or broadcast is one made— ․ [¶] 2.   In any ․ judicial proceeding․”  This absolute privilege has been applied in cases in which intentional interference with contractual relations and intentional interference with prospective advantage has been alleged.  (See e.g. Rosenthal v. Irell & Manella (1982) 135 Cal.App.3d 121, 185 Cal.Rptr. 92;  Asia Investment Co. v. Borowski (1982) 133 Cal.App.3d 832, 184 Cal.Rptr. 317.)

 The privilege applies under the following circumstances:  “[T]he publication (1) was made in a judicial proceeding;  (2) had some connection or logical relation to the action;  (3) was made to achieve the objects of the litigation;  and (4) involved litigants or other participants authorized by law.”  (Bradley v. Hartford Acc. & Indem. Co. (1973) 30 Cal.App.3d 818, 825, 106 Cal.Rptr. 718.)

 Although PG & E's complaint alleges that Bear Stearns' conduct ultimately led to the San Diego action, Bear Stearns' conduct does not meet the first and fourth criteria.   It arguably meets the second and the third.   More importantly, PG & E points out that privilege does not protect conduct or actions.   The absolute privilege of section 47, subdivision 2, protects only statements or publications.  (Westlake Community Hosp. v. Superior Court (1976) 17 Cal.3d 465, 482, 131 Cal.Rptr. 90, 551 P.2d 410;  Rosenfeld, Meyer & Susman v. Cohen, supra, 146 Cal.App.3d at p. 234, 194 Cal.Rptr. 180.)

 The privilege under section 47, subdivision 2, is a very tenuous ground for sustaining the demurrer in the present case.  “Underlying the privilege is the vital public policy of affording free access to the courts and facilitating the crucial functions of the finder of fact.  [Citation.]”  (Ribas v. Clark (1985) 38 Cal.3d 355, 364–365, 212 Cal.Rptr. 143, 696 P.2d 637.)   The privilege allows attorneys to use their best efforts on behalf of their clients and witnesses to testify without fear of civil liability for what they say.  (Ibid.;  Rosenfeld, Meyer & Susman v. Cohen, supra, 146 Cal.App.3d at p. 231, 194 Cal.Rptr. 180.)

 Agency is entitled to access to the courts to determine its rights and obligations under the power contract.   The policies behind the privilege, however, are not advanced by applying the privilege to Bear Stearns' conduct in the present case.   The trial court erred when it sustained the demurrer on this ground.

PG & E has adequately stated causes of action for intentional interference with contractual relations and intentional interference with economic advantage.   The order sustaining those causes of action is reversed.

FOOTNOTES

1.   The Statement of facts is derived from the allegations of the second amended complaint.

2.   Bear Stearns and Company is a partnership.   In October, 1985, it transferred substantially all of its assets to Bear Stearns and Co. Inc., a 100 percent owned subsidiary of The Bear Stearns Companies Inc.   The partnership holds over 70 percent of the stock of The Bear Stearns Companies Inc.   All three will be collectively referred to as “Bear Stearns.”

3.   California courts have held that even if a defendant's conduct is lawful, a cause of action may still lie if no justification or privilege exists allowing the interference.  (Chicago Title Ins. Co. v. Great Western Financial Corp. (1968) 69 Cal.2d 305, 319, 70 Cal.Rptr. 849, 444 P.2d 481;  Sade Shoe Co. v. Oschin & Snyder (1984) 162 Cal.App.3d 1174, 1179, 209 Cal.Rptr. 124.)   See discussion of justification or privilege, infra.

4.   Bear Stearns does not concede that it might be liable for those damages.   Bear Stearns contends that its conduct was privileged or justified.   See discussion infra.

5.   The Restatement notes, “One's interest in a contract terminable at will is primarily an interest in the future relations between the parties, and has no legal assurance of them.   For this reason, an interference with this interest is closely analogous to interference with prospective contractual relations.”  (Rest.2d Torts, § 766, com. g;  see also § 767, com. c., emphasis added.)

6.   PG & E stated a third cause of action, for attempted inducement of breach of contract.   Bear Stearns questions whether such a cause of action exists.   PG & E has not responded to Bear Stearns' inquiry, nor has it cited authority which creates such a cause of action.   Since we have found no authority creating such a cause of action, we must conclude that cause of action was properly dismissed.

7.   Bear Stearns also asserts that the issuance of an injunction, prohibiting it from aiding Placer, cannot prevent the alleged harm that will flow from Placer's termination of the contract.That litigation likely will continue to its conclusion, with or without Bear Stearns' help.   However, if PG & E can prove its allegations, it is entitled to prevent Bear Stearns from providing further funds for legal, engineering, and consulting services in support of Placer's effort.

8.   The Restatement of Torts section 914, subdivision (2) provides:“One who through the tort of another has been required to act in the protection of his interests by bringing or defending an action against a third person is entitled to recover reasonable compensation for loss of time, attorney fees and other expenditures thereby suffered or incurred in the earlier action.”

9.   Bear Stearns contends the judicially noticed “Financial Consulting Services Agreement” (the contingent fee contract) establishes that it acted only in the capacity of a financial advisor.

10.   The Restatement Second of Torts section 767 provides:“In determining whether an actor's conduct in intentionally interfering with a contract or a prospective contractual relation of another is improper or not, consideration is given to the following factors:(a) the nature of the actor's conduct,(b) the actor's motive,(c) the interests of the other with which the actor's conduct interferes,(d) the interests sought to be advanced by the actor,(e) the social interests in protecting the freedom of action of the actor and the contractual interests of the other,(f) the proximity or remoteness of the actor's conduct to the interference and(g) the relations between the parties.”

HOLMDAHL, Associate Justice.

RACANELLI, P.J., and NEWSOM, J., concur.