Korea Supply Co. v. Lockheed Martin Corp., No. S100136.

CourtUnited States State Supreme Court (California)
Writing for the CourtMORENO, J.
Citation63 P.3d 937,29 Cal.4th 1134,131 Cal.Rptr.2d 29
PartiesKOREA SUPPLY COMPANY, Plaintiff and Appellant, v. LOCKHEED MARTIN CORPORATION et. al, Defendants and Respondents.
Decision Date03 March 2003
Docket NumberNo. S100136.

131 Cal.Rptr.2d 29
29 Cal.4th 1134
63 P.3d 937

KOREA SUPPLY COMPANY, Plaintiff and Appellant,
v.
LOCKHEED MARTIN CORPORATION et. al, Defendants and Respondents

No. S100136.

Supreme Court of California.

March 3, 2003.


131 Cal.Rptr.2d 33
Blecher & Collins, Steven J. Cannata, David W. Kesselman and Maxwell M. Blecher, Los Angeles, for Plaintiff and Appellant

O'Melveny & Myers, Marc F. Feinstein, Marc S. Williams, Robert E. Willett and James W. Colbert III, Los Angeles, for Defendants and Respondents Lockheed Martin Corporation and Lockheed Martin Tactical Systems, Inc.

Law Offices of Jiyoung Kym and Jiyoung Kym, Los Angeles, for Defendant and Respondent Linda Kim.

Fred J. Hiestand for the Civil Justice Association of California as Amicus Curiae on behalf of Defendants and Respondents.

Robie & Matthai, Los Angeles, Pamela E. Dunn and Daniel J. Koes, Pasadena, for United Services Automobile Association as Amicus Curiae on behalf of Defendants and Respondents.

131 Cal.Rptr.2d 34
Gibson, Dunn & Crutcher, Gail E. Lees, Los Angeles, Mark A. Perry and G. Charles Nierlich, San Francisco, for Aetna Health of California, Inc., Cingular Wireless LLC and AT & T Wireless Services, Inc., as Amici Curiae on behalf of Defendants and Respondents

Skadden, Arps, Slate, Meagher & Flom, Raoul D. Kennedy, Sheryl C. Medeiros, San Francisco, and Benjamin R. Ostapuk for Citibank (South Dakota), N.A., as Amicus Curiae on behalf of Defendants and Respondents.

Heller Ehrman White & McAuliffe, Vanessa Wells and Andrew C. Byrnes, Menlo Park, for State Farm Mutual Automobile Insurance Company as Amicus Curiae on behalf of Defendants and Respondents.

Horvitz & Levy, David M. Axelrad, Lisa Perrochet, Encino, and Loren H. Kraus, Los Angeles, for Truck Insurance Exchange and Mid-Century Insurance Company as Amici Curiae on behalf of Defendants and Respondents Lockheed Martin Corporation and Lockheed Martin Tactical Systems, Inc.

Horvitz & Levy, Mitchell C. Tilner, Encino, and William N. Hancock for Quality King Distributors, Inc., as Amici Curiae on behalf of Defendants and Respondents Lockheed Martin Corporation and Lockheed Martin Tactical Systems, Inc.

Morrison & Foerster, Robert S. Stern, John Sobieski and John W. (Jack) Alden, Jr., Los Angeles, for Bank One Corporation as Amicus Curiae on behalf of Defendants and Respondents Lockheed Martin Corporation and Lockheed Martin Tactical Systems, Inc.

Arnold & Porter, James F. Speyer, Ronald C. Redcay, Los Angeles; Kirkland & Ellis and Alexander F. Mackinnon, Los Angeles, for California Manufacturers and Technology Association and BP Oil Supply Company as Amici Curiae on behalf of Defendants and Respondents Lockheed Martin Corporation and Lockheed Martin Tactical Systems, Inc.

Crosby, Heafey, Roach & May, James C. Martin, Los Angeles, Christina J. Imre, Encino, Michael K. Brown, Los Angeles; Daniel J. Popeo and Richard A. Samp, Arlington, Va., for Washington Legal Foundation and National Association of Independent Insurers as Amici Curiae on behalf of Defendants and Respondents Lockheed Martin Corporation and Lockheed Martin Tactical Systems, Inc.

MORENO, J.

This case addresses what claims and remedies may be pursued by a plaintiff who alleges a lost business opportunity due to the unfair practices of a competitor. The Republic of Korea wished to purchase military equipment known as synthetic aperture radar (SAR) systems and solicited competing bids from manufacturers, including Loral Corporation (Loral) and MacDonald, Dettwiler, and Associates Ltd. (MacDonald Dettwiler). Plaintiff Korea Supply Company (KSC) represented Mac-Donald Dettwiler in the negotiations for the contract and stood to receive a commission of over $30 million if MacDonald Dettwiler's bid was accepted. Ultimately, the contract was awarded to Loral (now Lockheed Martin Tactical Systems, Inc.). KSC contends that even though Mac-Donald Dettwiler's bid was lower and its equipment superior, it was not awarded the contract because Loral Corporation and its agent had offered bribes and sexual favors to key Korean officials. KSC instituted the present action asserting claims under both California's unfair competition law (Bus. & Prof.Code, ? 17200 et seq.) and the tort of interference with prospective economic advantage.

131 Cal.Rptr.2d 35
We granted review to decide two issues. First, we address whether disgorgement of profits allegedly obtained by means of an unfair business practice is an authorized remedy under the UCL where these profits are neither money taken from a plaintiff nor funds in which the plaintiff has an ownership interest. We conclude that disgorgement of such profits is not an authorized remedy in an individual action under the UCL. Accordingly, we reverse the judgment of the Court of Appeal on this issue

Second, we address whether, to state a claim for interference with prospective economic advantage, a plaintiff must allege that the defendant specifically intended to interfere with the plaintiffs prospective economic advantage. We conclude that a plaintiff need not plead that the defendant acted with the specific intent to interfere with the plaintiffs business expectancy in order to state a claim for this tort. We affirm the judgment of the Court of Appeal on this issue.

I.

"Because `[t]his case comes to us after the sustaining of a general demurrer . . ., we accept as true all the material allegations of the complaint.'" (Charles J. Vacanti, M.D., Inc. v. State Comp. Ins. Fund (2001) 24 Cal.4th 800, 807, 102 Cal. Rptr.2d 562, 14 P.3d 234, quoting Shoemaker v. Myers (1990) 52 Cal.3d 1, 7, 276 Cal.Rptr. 303, 801 P.2d 1054.)

Plaintiff KSC is a corporation engaged in the business of representing manufacturers of military equipment in transactions with the Republic of Korea. In the mid-1990's, the Republic of Korea solicited bids for a SAR system for use by its military. KSC represented MacDonald Dettwiler, a Canadian company, in its bid to obtain the contract award. KSC expected a commission of 15 percent of the contract price, or over $30 million, if Mac-Donald Dettwiler were awarded the contract.

In June 1996, the Korean Ministry of Defense announced that Loral,1 an American competitor of the Canadian company MacDonald Dettwiler, was awarded the contract, despite the fact that MacDonald Dettwiler's bid was about $50 million lower and that the project management office of the Korean Defense Intelligence Command had determined that MacDonald Dettwiler's equipment was far superior to Loral's system. The Ministry of Defense explained that the decision to award Loral the contract was based on a suggestion that the United States government would not be favorably disposed to share intelligence information with the Republic of Korea if the latter selected a Canadian supplier.

Beginning in October 1998, major news publications in the Republic of Korea revealed that an internal investigation had established that the SAR contract was awarded to Loral as a result of bribes and sexual favors, rather than pressure from the United States government. Loral's agent for the procurement of the SAR contract, defendant Linda Kim, had bribed two Korean military officers. In addition, Ms. Kim had extended bribes and sexual favors to the Minister of National Defense, the ultimate decision maker with respect to the award of the SAR contract. Ms. Kim reportedly received approximately $10 million in commission from Loral, an

131 Cal.Rptr.2d 36
amount that exceeded the maximum established by the Foreign Corrupt Practices Act (15 U.S.C. ? 78dd-2) and foreign military sales policies and regulations. As a result of the internal investigation by the Republic of Korea, several persons were imprisoned, including high-ranking Korean military officers. Ms. Kim herself was indicted in absentia; she avoided imprisonment because she resides in the United States and refuses to travel to the Republic of Korea.

Upon learning of these alleged reasons for the award of the SAR contract to Loral, KSC commenced the present action on May 5, 1999. In its first amended complaint, KSC alleged that defendants2 "conspired, knowingly and intentionally to induce and did knowingly and intentionally induce the Republic of Korea, through its authorized agencies, to award the SAR contract to Loral instead of MacDonald Dettwiler by employing wrongful means including bribes and sexual favors." As a direct and proximate result of defendants' actions, the Republic of Korea awarded the contract to Loral; but for the bribes and sexual favors, this contract would have been awarded to MacDonald Dettwiler. "In securing the contract by wrongful means, Loral acted with full knowledge of the commission relationship between plaintiff and MacDonald Dettwiler and knowing that its interference with the award of the contract . . . would cause plaintiff severe loss." "Defendant Lockheed Martin has been the beneficiary of the illegal Loral-Kim conduct and to that extent has been unjustly enriched."

The first amended complaint asserts three causes of action: (1) conspiracy to interfere with prospective economic advantage, (2) intentional interference with prospective economic advantage, and (3) unfair competition pursuant to Business and Professions Code section 17200.3 For its unfair competition claim, KSC sought disgorgement to it of the profits realized by Lockheed Martin on the sale of the SAR to Korea. For the tort claims, KSC sought damages for the loss of its expected compensation from MacDonald Dettwiler.

Lockheed Martin, joined by Ms. Kim, generally demurred to all counts. The trial court sustained the demurrer without leave to amend, finding that plaintiff's complaint did not state facts sufficient to constitute a cause of action under California law. Judgment was entered dismissing the action on September 7, 1999. After the trial court subsequently denied KSC's motion for reconsideration, KSC filed its notice of appeal. The Court of Appeal...

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1419 practice notes
  • United Energy Trading, LLC v. Pac. Gas & Elec. Co., Case No. 15-cv-02383-RS
    • United States
    • United States District Courts. 9th Circuit. United States District Courts. 9th Circuit. Northern District of California
    • November 20, 2015
    ...and (5) economic harm to the plaintiff proximately caused by the acts of defendant. See Korea Supply Co. v. Lockheed Martin Corp. , 29 Cal.4th 1134, 1153–54, 131 Cal.Rptr.2d 29, 63 P.3d 937 (2003).UET's factual averments here largely mirror those in the prior section. UET has therefore plea......
  • In re Libor-Based Fin. Instruments Antitrust Litig., 11 MDL 2262 (NRB)
    • United States
    • United States District Courts. 2nd Circuit. United States District Courts. 2nd Circuit. Southern District of New York
    • August 4, 2015
    ...when S & S Japan signed the exclusive distribution agreement with [defendant]."); Korea Supply Co. v. Lockheed Martin Corp., 29 Cal. 4th 1134, 131 Cal. Rptr. 2d 29 (2003) (military contract awarded to defendant as result of corrupt influence despite plaintiff's superior bid); Restatement (S......
  • Solyndra Residual Trust v. Suntech Power Holdings Co., Case No: C 12–05272 SBA
    • United States
    • United States District Courts. 9th Circuit. United States District Courts. 9th Circuit. Northern District of California
    • March 31, 2014
    ...regulatory, common law, or other determinable legal standard. Korea Supply Co. v. Lockheed Martin Corp. , 29 Cal.4th [1134] at 1159, 131 Cal.Rptr.2d 29, 63 P.3d 937.The parties disagree as to whether Defendants' alleged conduct qualifies as an unlawful act. Defs.' Mot. at 20–21; Pl.'s Opp'n......
  • SkinMedica, Inc. v. Histogen Inc., Case No. 09–CV–122 JLS (RBB).
    • United States
    • United States District Courts. 9th Circuit. United States District Court (Southern District of California)
    • April 23, 2012
    ...under the UCL; the available remedies are limited to restitution and injunctive relief. See Korea Supply Co. v. Lockheed Martin Corp., 29 Cal.4th 1134, 1147, 131 Cal.Rptr.2d 29, 63 P.3d 937 (2003); Smit v. Charles Schwab & Co., Inc., 2011 WL 846697 at *9, 2011 U.S. Dist. LEXIS 25589 at *28 ......
  • Request a trial to view additional results
1412 cases
  • United Energy Trading, LLC v. Pac. Gas & Elec. Co., Case No. 15-cv-02383-RS
    • United States
    • United States District Courts. 9th Circuit. United States District Courts. 9th Circuit. Northern District of California
    • November 20, 2015
    ...and (5) economic harm to the plaintiff proximately caused by the acts of defendant. See Korea Supply Co. v. Lockheed Martin Corp. , 29 Cal.4th 1134, 1153–54, 131 Cal.Rptr.2d 29, 63 P.3d 937 (2003).UET's factual averments here largely mirror those in the prior section. UET has therefore plea......
  • In re Libor-Based Fin. Instruments Antitrust Litig., 11 MDL 2262 (NRB)
    • United States
    • United States District Courts. 2nd Circuit. United States District Courts. 2nd Circuit. Southern District of New York
    • August 4, 2015
    ...when S & S Japan signed the exclusive distribution agreement with [defendant]."); Korea Supply Co. v. Lockheed Martin Corp., 29 Cal. 4th 1134, 131 Cal. Rptr. 2d 29 (2003) (military contract awarded to defendant as result of corrupt influence despite plaintiff's superior bid); Restatement (S......
  • Solyndra Residual Trust v. Suntech Power Holdings Co., Case No: C 12–05272 SBA
    • United States
    • United States District Courts. 9th Circuit. United States District Courts. 9th Circuit. Northern District of California
    • March 31, 2014
    ...regulatory, common law, or other determinable legal standard. Korea Supply Co. v. Lockheed Martin Corp. , 29 Cal.4th [1134] at 1159, 131 Cal.Rptr.2d 29, 63 P.3d 937.The parties disagree as to whether Defendants' alleged conduct qualifies as an unlawful act. Defs.' Mot. at 20–21; Pl.'s Opp'n......
  • SkinMedica, Inc. v. Histogen Inc., Case No. 09–CV–122 JLS (RBB).
    • United States
    • United States District Courts. 9th Circuit. United States District Court (Southern District of California)
    • April 23, 2012
    ...under the UCL; the available remedies are limited to restitution and injunctive relief. See Korea Supply Co. v. Lockheed Martin Corp., 29 Cal.4th 1134, 1147, 131 Cal.Rptr.2d 29, 63 P.3d 937 (2003); Smit v. Charles Schwab & Co., Inc., 2011 WL 846697 at *9, 2011 U.S. Dist. LEXIS 25589 at *28 ......
  • Request a trial to view additional results
1 books & journal articles
  • Antitrust and Sports Equipment Standards: Winners and Whiners
    • United States
    • Antitrust Bulletin Nbr. 54-4, December 2009
    • December 1, 2009
    ...prospective gain is actionable only if effectuated by independ-ently unlawful means. See, e.g., Korea Supply Co. v. Lockheed Martin Corp.,63 P.3d 937 (Cal. 2003); Wal-Mart Stores, Inc. v. Sturges, 52 S.W.3d 711 (Tex.2001); Speakers of Sport, Inc. v. ProServ, Inc., 178 F.3d 862 (7th Cir. 199......

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