STELLA FOODS INC v. CACIQUE INC (1997)

From October 1993 to September 1994, Stella Foods, Inc. manufactured and sold cheese products in the “Hispanic cheese market” then dominated by Cacique, Inc. Cacique sued Stella Foods, alleging a misappropriation of trade secrets and other acts of unfair competition.   Stella Foods cross-complained against Cacique for (among other things) intentional interference with prospective economic relations and unfair competition in violation of the Unfair Practices Act, Business and Professions Code section 17000 et seq. (the UPA), alleging that Cacique had granted illegal rebates and discounts to its customers and sold its products below cost.   Cacique moved for summary adjudication of issues, challenging these two causes of action.   Over Stella Foods' opposition, the trial court granted the motion, notwithstanding its express finding that Stella Foods had raised triable issues of material fact concerning Cacique's “below cost pricing on a targeted basis” and “locality discrimination,” both in violation of the UPA and various provisions of the Food and Agricultural Code.

According to the trial court, Stella Foods could not prevail on its intentional interference cause of action because Cacique's conduct was not “wrongful” or independently actionable by Stella Foods, and Stella Foods could not prevail on its unfair competition cause of action because Cacique is exempt from the provisions of the UPA. (Food & Agr.Code, § 61343.)   Stella Foods filed a petition for a writ of mandate in which it contends both rulings were wrong.   We stayed trial on the remaining claims and cross-claims, issued an order to show cause, and set the matter for hearing.   We hold that the trial court was mistaken about the interference cause of action but right about the UPA cause of action, and therefore grant the writ as to the former but deny it as to the latter.

DISCUSSION

I.Intentional Interference With Prospective Economic Relations

 Stella Foods contends the trial court improperly required Stella Foods to establish that Cacique's conduct was not only wrongful but also independently actionable by Stella Foods (that is, that whatever Cacique did had to (1) constitute a wrong other than interference with prospective economic relations and (2) that “wrong” had to be something for which Stella Foods could sue Cacique).¹  We agree with Stella Foods.

A.

In Della Penna v. Toyota Motor Sales, U.S.A., Inc. (1995) 11 Cal.4th 376, 45 Cal.Rptr.2d 436, 902 P.2d 740, our Supreme Court held that “a plaintiff seeking to recover for alleged interference with prospective economic relations has the burden of pleading and proving that the defendant's interference was wrongful ‘by some measure beyond the fact of the interference itself.’ ”  (Id. at pp. 392-393, 45 Cal.Rptr.2d 436, 902 P.2d 740.)   Beyond that, the Court did not go, making it clear that arguments for refinements, such as “requiring the plaintiff to prove, for example, that the defendant's conduct amounted to an independently tortious act, or was a species of anticompetitive behavior proscribed by positive law, or was motivated by unalloyed malice,” would be considered on another day, in another case.   (Id. at p. 378, 45 Cal.Rptr.2d 436, 902 P.2d 740.) ²

B.

The cases decided after Della Penna have not extended the pleading or proof requirements for this tort.

In Willard v. Caterpillar, Inc. (1995) 40 Cal.App.4th 892, 920, 48 Cal.Rptr.2d 607, the Fifth District, asked to decide the meaning of “wrongful” in the context of a different tort (intentional spoliation of evidence), looked to Della Penna for guidance (“[b]ecause the spoliation tort is generally recognized as an offshoot of interference with prospective economic relations, we have no doubt that the Della Penna rule applies here”) but found none:  “The Supreme Court ․ did not define the ‘wrongfulness' standard․  Thus, we will examine [the defendant's] conduct in light of the Restatement's suggestion that conduct which is ‘illegal or unfair or immoral according to the common understanding of society’ may subject one to tort liability.  (Rest.2d Torts, ․ § 870, com. h, p. 284.)”  (Willard v. Caterpillar, Inc., supra, 40 Cal.App.4th at p. 920, 48 Cal.Rptr.2d 607.)

In PMC, Inc. v. Saban Entertainment, Inc. (1996) 45 Cal.App.4th 579, 602-603, 52 Cal.Rptr.2d 877, Division Three of our Court affirmed summary adjudication in favor of a defendant, holding that conduct “ ‘may be wrongful by reason of a statute or other regulation, or a recognized rule of common law or perhaps an established standard of a trade or profession.’  ․ Commonly included among improper means are actions which are independently actionable, violations of federal or state law or unethical business practices, e.g., violence, misrepresentation, unfounded litigation, defamation, trade libel or trade mark infringement․”  (Ibid., quoting Top Serv. Body Shop, Inc. v. Allstate Ins. Co. (1978) 283 Or. 201, 582 P.2d 1365, 1371.)   In PMC, the defendant's actions “were neither underhanded, immoral nor wrongful.”  (PMC, Inc. v. Saban Entertainment, Inc., supra, 45 Cal.App.4th at p. 604, 52 Cal.Rptr.2d 877.)

In Arntz Contracting Co. v. St. Paul Fire & Marine Ins. Co. (1996) 47 Cal.App.4th 464, 480, 54 Cal.Rptr.2d 888, Division One of the First District held that the element of “wrongfulness” is not satisfied where the evidence shows the defendant did no more than exercise its contractual rights and make truthful statements to interested parties.   As does PMC, Inc. v. Saban Entertainment, Inc., supra, 45 Cal.App.4th at pages 602-603, 52 Cal.Rptr.2d 877, Arntz quotes the Oregon Supreme Court for the idea that “wrongful conduct” can be shown by acts that violate “ ‘a statute or other regulation, or a recognized rule of common law, or perhaps an established standard of a trade or profession.’ ”  (Arntz Contracting Co. v. St. Paul Fire & Marine Ins. Co., supra, 47 Cal.App.4th at p. 477, 54 Cal.Rptr.2d 888, quoting Top Serv. Body Shop, Inc. v. Allstate Ins. Co., supra, 582 P.2d at p. 1371.)

In LiMandri v. Judkins (1997) 52 Cal.App.4th 326, 342, 60 Cal.Rptr.2d 539, Division One of the Fourth District held that “the plaintiff must allege the conduct constituting the interference was itself wrongful by some other measure beyond the fact it amounted to interference.   It is insufficient to allege the defendant engaged in tortious conduct distinct from or only tangentially related to the conduct constituting the actual interference.” ³

In Bed, Bath & Beyond of La Jolla, Inc. v. La Jolla Village Square Venture Partners (1997) 52 Cal.App.4th 867, 882, 60 Cal.Rptr.2d 830, Division One of the Fourth District noted that Della Penna offered no guidance on the subject of “wrongfulness” but found that, under any definition, the plaintiff had “never shown or even contended that [the defendant] engaged in conduct which is wrongful by some measure beyond the fact of interference itself.”

 If there is anything to be distilled from Della Penna and its progeny, it is this:  A cause of action for intentional interference with prospective economic relations cannot survive without proof of some wrongful conduct by the defendant.   To be “wrongful” in this context, the conduct must be something more than permissible action that happens to interfere with the plaintiff's prospective economic relations.   More specifically, the conduct must be illegal or unfair or immoral according to the common understanding of society (Willard v. Caterpillar, Inc., supra, 40 Cal.App.4th at p. 920, 48 Cal.Rptr.2d 607), or it must violate a statute or other regulation or a recognized rule of common law or an established standard of a trade or profession (Arntz Contracting Co. v. St. Paul Fire & Marine Ins. Co., supra, 47 Cal.App.4th at p. 477, 54 Cal.Rptr.2d 888, quoting Top Serv. Body Shop, Inc. v. Allstate Ins. Co., supra, 582 P.2d at p. 1371), or it must be independently tortious (in the sense that it injures a third person), or it must constitute a restraint of trade (Della Penna v. Toyota Motor Sales, U.S.A., Inc., supra, 11 Cal.4th at pp. 408-410, 45 Cal.Rptr.2d 436, 902 P.2d 740, conc. opn. of Mosk, J.).   But there is no authority at all to suggest the conduct is not “wrongful” unless it is both separately actionable and actionable by the victim of the interference (or by some other private party).

C.

 At this stage of this case, the trial court has found that there are triable issues of material fact as to whether Cacique engaged in “below cost pricing on a targeted basis” and in “locality discrimination.”   For present purposes, therefore, Stella Foods has met its burden of proof with regard to its interference with prospective economic relations claim if either act is “wrongful” under any of the tests discussed above.  (Code Civ. Proc., § 437c, subd. (o) [summary adjudication must be denied if there are triable issues of material fact].) ⁴  Under any test, the conduct is “wrongful.”

 Cacique, a manufacturer and distributor of dairy products, is exempt from the UPA (Bus. & Prof.Code, § 17000 et seq.) because Cacique's trade practices are strictly governed by the more specific provisions of the Food and Agricultural Code.  (Food & Agr.Code, § 61343 [“Any person and subject matter to which this chapter is applicable is not subject to the provisions of the Unfair Practices Act”].)   Specifically, the marketing laws governing dairy products expressly prohibit as an “unlawful practice” (1) the “extension to any wholesale customer or consumer of any special price or service which is not made available to all wholesale customers or consumers that purchase any ․ dairy product of like quantity under like terms and conditions ․” (Food & Agr.Code, § 61377);  (2) the “[d]iscrimination in price between distributors or between wholesale customers, or between consumers, that purchase ․ any dairy product of like grade and quality under like conditions of service if the effect of that discrimination may be substantially to lessen competition or to injure or destroy or prevent competition with the person that either grants or knowingly receives the benefit of the discrimination ․” (id., § 61382);  and (3) the “sale by any ․ manufacturer [or] distributor ․ of ․ any dairy product at less than cost․”  (Id., § 61384).

At a minimum, therefore, Cacique's conduct violates at least three statutes and is therefore “wrongful” under any definition that uses a statutory or regulatory violation as its litmus test (as well as under any definition that is based on “unfair” conduct or conduct in restraint of trade).   We reject Cacique's contention that violations of these statutes are insufficient because they are actionable only by the Director of the Department of Food and Agriculture, not by a private right of action.  (Food & Agr.Code, §§ 61572-61573.)   Simply put, there is nothing in Della Penna or its progeny to justify erection of this additional hurdle.⁵  For us, it is enough that Stella Foods has passed the test articulated in Della Penna by showing conduct that is (1) independently wrongful and (2) a species of anti-competitive behavior proscribed by positive law.  (Della Penna v. Toyota Motor Sales, U.S.A., Inc., supra, 11 Cal.4th at p. 378, 45 Cal.Rptr.2d 436, 902 P.2d 740.)

II.

The Unfair Competition Cause of Action Business and Professions Code Section 17200 et seq.

We summarily reject Stella Foods' contention that Cacique's violations of the Food and Agricultural Code entitle Stella Foods to pursue an unfair competition claim under section 17000 et seq. of the Business and Professions Code. Section 61343 of the Food and Agricultural Code provides a complete exemption for Cacique from “the provisions of the Unfair Practices Act, Chapter 4 (commencing with Section 17000), Part 2, Division 7 of the Business and Professions Code.” This is not a case such as Saunders v. Superior Court, supra, 27 Cal.App.4th at page 839, 33 Cal.Rptr.2d 438, where there was nothing more than a “borrowing” of a predicate statute that did not provide for private civil action.   Rather, this is a case with an express statutory exemption protecting Cacique from liability under the UPA. Since it is difficult to imagine how the Legislature could have spoken with greater clarity, no more need be said.⁶

DISPOSITION

Let a peremptory writ issue commanding the trial court (1) to vacate that portion of its order granting Cacique's motion for summary adjudication of Stella Foods' fourth cause of action for intentional interference with prospective economic relations and (2) to enter a new order denying that part of Cacique's motion.   In all other respects, the petition is denied.   The parties are to pay their own costs of these writ proceedings.   Upon issuance of remittitur, the stay heretofore imposed shall be dissolved without further order of this court.

FOOTNOTES

1.   Cacique says it has never contended that the wrongful conduct must be actionable “by the plaintiff.”   We'll accept Cacique's word for what it intended, but that does not change the fact that the trial court's ruling leaves little doubt that this is what it intended.

2.   In a concurring opinion, Justice Mosk discussed the concept of “independent tortious conduct,” explaining that the defendant's conduct may sometimes constitute an independent tort vis-vis a third person (that is, a tort other than interference which affects someone other than the party whose economic relations are injured, as where the defendant's fraud on a third party causes the third party to interfere with the plaintiff's prospective economic relations).   In Justice Mosk's view, the proscribed conduct should be limited to means that are either independently tortious in this manner or that otherwise constitute a restraint of trade.   (Della Penna v. Toyota Motor Sales, U.S.A., Inc., supra, 11 Cal.4th at pp. 408-410, 45 Cal.Rptr.2d 436, 902 P.2d 740, conc. opn. of Mosk, J.) Of course, a restraint of trade or other anti-competitive act invariably injures a third person (the consumer).

3.   In LiMandri, the plaintiff claimed the conduct at issue was “independently wrongful” because it violated various statutes governing transactions creating security interests in personal property or fixtures.   The court rejected this argument because the statutes were not ones that could be “violated”-they simply set forth the claims that could be perfected and those that could not.  (LiMandri v. Judkins, supra, 52 Cal.App.4th at pp. 342-343, 60 Cal.Rptr.2d 539.)

4.   For simplicity's sake but solely for purposes of this opinion, we treat these wrongful acts as established.   Assuming the case goes to trial, the burden will be on Stella Foods to do more than simply create a triable issue of fact-it will have to prove these things occurred, as well as all other elements of its claim.

5.   Cacique contends that unless the “wrongful” conduct is “restricted to violations of statutes or recognized rules of common law that permit a private right of action, every statute will be given a private right of action by the simple expedient of pleading its violation as a tort claim for intentional interference.”   The problem with this argument is that unfair competition actions under Business and Professions Code section 17000 et seq. can generally be pursued in just this fashion.   As Division Seven of our court explained in Saunders v. Superior Court (1994) 27 Cal.App.4th 832, 839, 33 Cal.Rptr.2d 438, “[i]t is not necessary that the predicate law provide for private civil enforcement․  [S]ection 17200 ‘borrows' violations of other laws and treats them as unlawful practices independently actionable under section 17200” of the Business and Professions Code. (See also Olsen v. Breeze, Inc. (1996) 48 Cal.App.4th 608, 618, 55 Cal.Rptr.2d 818;  Samura v. Kaiser Foundation Health Plan, Inc. (1993) 17 Cal.App.4th 1284, 1299, 22 Cal.Rptr.2d 20.)   We believe the same reasoning applies here, particularly since there is no public policy reason to immunize a defendant from the kind of violation that occurred in this case, and also because the reason for Cacique's exemption from liability for the UPA is the existence of the very statutes it has violated.

6.   This matter is before us on a petition filed after the trial court ruled on Cacique's second motion for summary adjudication.   Although the first motion was limited to only a few issues, the current motion attacked the interference cause of action from all sides, including causation and damages (as well as the issues resolved in this opinion)-but the trial court never reached the other issues and did not determine whether there were disputed facts concerning causation, damages or anything other than “below cost pricing” and “locality discrimination.”   We decline Cacique's invitation to decide those issues in the first instance (the record is voluminous, riddled with evidentiary objections and otherwise inappropriate for writ review of the remaining issues).   We hold, however, that this opinion is without prejudice to Cacique's right to raise the remaining issues in the trial court by means of a renewed motion for summary adjudication of issues.

MIRIAM A. VOGEL, Associate Justice.

SPENCER, P.J., and ORTEGA, J., concur.