Redfearn v. Trader Joe's Co.

• Decision Date: 27 February 2018
• Docket Number: B270487
• Court: California Court of Appeals Court of Appeals
• Parties: Wayne REDFEARN, Plaintiff and Appellant, v. TRADER JOE'S COMPANY, Defendant and Respondent.

20 Cal.App.5th 989

230 Cal.Rptr.3d 98

Wayne REDFEARN, Plaintiff and Appellant,

v.TRADER JOE'S COMPANY, Defendant and Respondent.

B270487

Court of Appeal, Second District, Division 7, California.

Filed February 27, 2018

As Modified on Denial of Rehearing March 16, 2018

Outwater & Pinckes, David E. Outwater, Irvine and Randi E. Pinckes for Plaintiff and Appellant.

O'Melveny & Myers, Dawn Sestito and R. Collins Kilgore, Los Angeles for Defendant and Respondent.

PERLUSS, P.J.

Wayne Redfearn appeals from the judgment of dismissal entered after the trial court sustained without leave to amend the demurrer of Trader Joe's Company to Redfearn's first amended complaint for intentional interference with contractual relations, intentional and negligent interference with prospective economic advantage and unfair competition. We reverse.

FACTUAL AND PROCEDURAL BACKGROUND

1. Redfearn's Complaint for Interference by Trader Joe's with Caliber Sales and Marketing Corporation's Broker Relationship with Two Food Suppliers

In his first amended complaint, filed September 3, 2015, Redfearn alleged he purchased Caliber Sales and Marketing Corporation, a food brokerage business, in 2001 and remained its largest shareholder until leaving the company in late 2014. At the time Redfearn severed his relationship with the company, Caliber assigned its legal claims against Trader Joe's to Redfearn.

Caliber represents manufacturers of food products and assists them in marketing their products, operating like an outside sales team in placing products in retail outlets and processing order flow once the relationship is established. Caliber began acting as a broker for Seneca Foods Corporation in 2003 and Sunsweet Growers Inc. in 2006 and successfully introduced their products into Trader Joe's stores.

Trader Joe's changed its policy toward food brokers in 2010 and stopped working with brokers in finding new products for its stores. However, Trader Joe's generally continued to deal with food brokers on existing accounts.

According to Redfearn's first amended complaint, in a meeting with a Seneca representative in January 2014, Trader Joe's executive Jon Basalone falsely accused Redfearn of spreading rumors that Trader Joe's employees were soliciting bribes and that paying a bribe was the only way to do business with them. Redfearn alleged Basalone made these false statements to encourage Seneca to stop using Caliber as a broker in Seneca's sales to Trader Joe's and further alleged that Basalone had stated, although he was aware Seneca might have a contract with Caliber, Seneca must terminate its relationship with Caliber or Trader Joe's would replace Seneca as a supplier. As a result of this conversation, Seneca terminated its contract with Caliber with respect to supplying its products to Trader Joe's.

Redfearn also alleged Trader Joe's exerted pressure on Sunsweet and made similar false statements to Sunsweet designed to tarnish Redfearn's professional reputation, causing Sunsweet to terminate its contract with Caliber to supply food products to Trader Joe's.

2. Trader Joe's' Demurrer and the Trial Court's Order Sustaining the Demurrer Without Leave To Amend

Trader Joe's demurred to the first amended complaint, asserting only a stranger to a contract can be liable for interference with contractual relations and arguing it was not a stranger to Caliber's contracts with Seneca and Sunsweet because the performance of those contracts depended on Trader Joe's' purchase of Seneca's and Sunsweet's products. Trader Joe's contended it could not be liable for interference with prospective economic advantage for the same reason, that is, Trader Joe's could not be liable for disrupting a potential relationship that was dependent on its own performance. In addition to arguments focusing on its close relationship to the Caliber-supplier contracts, Trader Joe's argued Redfearn had not adequately pleaded its conduct was independently wrongful, a necessary element for interference with prospective economic advantage.

Redfearn opposed the demurrer to his three interference causes of action, but agreed to voluntarily dismiss the unfair competition cause of action.

The trial court sustained Trader Joe's' demurrer without leave to amend. Relying on PM Group, Inc. v. Stewart (2007) 154 Cal.App.4th 55, 64 Cal.Rptr.3d 227 ( PM Group ) and distinguishing Asahi Kasei Pharma Corp. v. Actelion Ltd. (2013) 222 Cal.App.4th 945, 169 Cal.Rptr.3d 689 ( Asahi ) and Powerhouse Motorsports Group, Inc. v. Yamaha Motor Corp., U.S.A. (2013) 221 Cal.App.4th 867, 164 Cal.Rptr.3d 811 ( Powerhouse ) in its eight-page ruling, the court found Trader Joe's was not a "stranger" to Caliber's contracts with Seneca and Sunsweet because the performance of those contracts depended on Trader Joe's purchasing products from the two suppliers: "Trader Joe's had the absolute right not to purchase food from the suppliers going forward. Indeed, given its contract with Seneca and Sunsweet, Trader Joe's had the power to control that agreement by taking steps to ensure that its suppliers did not use brokers by terminating any suppliers that used brokers in their transactions." Accordingly, the court ruled, Trader Joe's was not liable for intentional interference with Caliber's contracts by refusing to purchase Seneca's and Sunsweet's products if they continued to use Caliber as a broker, "regardless of the nature of Trader Joe's conduct." Similarly, because Trader Joe's was not a stranger to the contracts at issue, applying the holding of Kasparian v. County of Los Angeles (1995) 38 Cal.App.4th 242, 266, 45 Cal.Rptr.2d 90, the court concluded Trader Joe's had no liability for intentional or negligent interference with prospective economic advantage.¹

In a footnote the court explained it did not need to reach Trader Joe's' alternative argument that it was not liable for intentional interference with contractual relations because the contracts between Caliber and the food processors were terminable at will. In another footnote the court identified as an independent ground for sustaining the demurrer to the causes of action for interference with prospective economic advantage the failure of Redfearn to allege any independently actionable conduct by Trader Joe's. The court stated Redfearn "has not pleaded an independent tort of defamation, nor does he make an offer of proof as to how a defamation claim could be alleged."

The court entered a judgment of dismissal on January 6, 2016. Redfearn filed a timely notice of appeal.

DISCUSSION

1. Standard of Review

A demurrer tests the legal sufficiency of the factual allegations in a complaint. We independently review the superior court's ruling on a demurrer and determine de novo whether the complaint alleges facts sufficient to state a cause of action or discloses a complete defense. ( Loeffler v. Target Corp. (2014) 58 Cal.4th 1081, 1100, 171 Cal.Rptr.3d 189, 324 P.3d 50 ; Committee for Green Foothills v. Santa Clara County Bd. of Supervisors (2010) 48 Cal.4th 32, 42, 105 Cal.Rptr.3d 181, 224 P.3d 920.) We assume the truth of the properly pleaded factual allegations, facts that reasonably can be inferred from those expressly pleaded and matters of which judicial notice has been taken. ( Evans v. City of Berkeley (2006) 38 Cal.4th 1, 20, 40 Cal.Rptr.3d 205, 129 P.3d 394 ; Schifando v. City of Los Angeles (2003) 31 Cal.4th 1074, 1081, 6 Cal.Rptr.3d 457, 79 P.3d 569.) However, we are not required to accept the truth of the legal conclusions pleaded in the complaint. ( Zelig v. County of Los Angeles (2002) 27 Cal.4th 1112, 1126, 119 Cal.Rptr.2d 709, 45 P.3d 1171 ; Tepper v. Wilkins (2017) 10 Cal.App.5th 1198, 1203, 217 Cal.Rptr.3d 111.) We liberally construe the pleading with a view to substantial justice between the parties. ( Code Civ. Proc., § 452 ; Ivanoff v. Bank of America (2017) 9 Cal.App.5th 719, 726, 215 Cal.Rptr.3d 442 ; see Schifando , at p. 1081, 6 Cal.Rptr.3d 457, 79 P.3d 569 [complaint must be read in context and given a reasonable interpretation].)

" ‘Where the complaint is defective, "[i]n the furtherance of justice great liberality should be exercised in permitting a plaintiff to amend his [or her] complaint." ’ " ( Aubry v. Tri-City Hospital Dist. (1992) 2 Cal.4th 962, 970-971, 9 Cal.Rptr.2d 92, 831 P.2d 317.) We determine whether the plaintiff has shown "in what manner he [or she] can amend [the] complaint and how that amendment will change the legal effect of [the] pleading." ( Goodman v. Kennedy (1976) 18 Cal.3d 335, 349, 134 Cal.Rptr. 375, 556 P.2d 737.) "[L]eave to amend should not be granted where ... amendment would be futile." ( Vaillette v. Fireman's Fund Ins. Co . (1993) 18 Cal.App.4th 680, 685, 22 Cal.Rptr.2d 807 ; see generally Ivanoff v. Bank of America , supra , 9 Cal.App.5th at p. 726, 215 Cal.Rptr.3d 442.)

2. Redfearn Has Adequately Stated a Cause of Action for Intentional Interference with Contractual Relations

a. The elements of the cause of action

"California recognizes a cause of action against noncontracting parties who interfere with the performance of a contract. ‘It has long been held that a stranger to a contract may be liable in tort for intentionally interfering with the performance of the contract.’ [Citation.] [¶] However, consistent with its underlying policy of protecting the expectations of contracting parties against frustration by outsiders who have no legitimate social or economic interest in the contractual relationship, the tort cause of action for interference with a contract does not lie against a party to the contract." ( Applied Equipment Corp. v. Litton Saudi Arabia Ltd. (1994) 7 Cal.4th 503, 513-514, 28 Cal.Rptr.2d 475, 869 P.2d 454 [fn. omitted; italics in original] ( Applied Equipment ).)

The elements of a cause of action for intentional interference with contractual relations are "(1) the existence of a valid contract between the plaintiff and a third party; (2) the defendant's knowledge of that contract; (3) the...