Della Penna v. Toyota Motor Sales, U.S.A., Inc.

Brief Fact Summary.

Toyota threatened sanctions on its dealers who re-exported Lexus autos into Japan.

Synopsis of Rule of Law.

In an action for intentional interference of prospective economic relations, the plaintiff bears the burden of proving that the defendant’s interference was wrongful by some measure beyond the fact of the interference itself.

Facts.

Toyota threatened sanctions on its dealers who re-exported Lexus autos into Japan.

Issue.

Who bears the burden in an action for intentional interference with prospective economic relations?

Held.

Reversed and remanded.

In an action for intentional interference with prospective economic relations, the plaintiff bears the burden of proving that the defendant’s interference was wrongful by some measure beyond the fact of the interference itself.

Concurrence.

Justice Mosk

The trial judge’s instruction error was not prejudicial. The meaning of “malice,” “justification,” and “privilege” in cases of intentional interference with prospective economic relations has become totally confused because:

Prima facie tort rules are generally a philosophical effort to reduce a tort to a single sentence rather than state a meaningful principle;
The tort threatens public policy values of freedom of competition; and
The tort focuses too much on the moral aspect of a interfering party’s motive, which may result in arbitrary and capricious outcomes.

The Court cannot leave the tort of intentional interference as it is, nor can it abolish the tort. So all that is left is to reformulate it. The tort should be satisfied by a showing of restraint of trade or independently tortious means as the majority holds.

However, Judge Mosk disputed two points:

The standard should not be of “wrongfulness” because this term is too vague; and
Instead, the standard should avoid focus on the morality of the interfering party’s motive.

Discussion.

Lumley v. Gye dealt with conduct intended to induce the breach of an existing contract. Temperton v. Russell then dealt with conduct intended to prevent others not to contract with the plaintiff. Both cases base liability on the defendant’s malicious intent, which could constitute any manner of intentional invasion of the plaintiff’s interests in a case of interference with contract.

Traditionally, a plaintiff only needed to show the defendant’s awareness of the economic relation, deliberate interference with it, and the plaintiff’s resulting injury. Then, the burden shifted to the defendant to demonstrate that its conduct was privileged by the defendant’s own competitive business interests. This traditional rule was criticized as being vague and inviting frivolous suits, so the Restatement Second of Torts devised a new rule that required that the defendant’s conduct be improper and adopted a multi-factor “balancing” approach of seven factors. However, the new rule did not address which of the parties bore the burden of proof.

State courts took the first step to address this problem, finding that a claim of interference where the interference is wrongful by some measure beyond the fact of the interference itself, such as a defendant’s improper motives, use of improper means, violation of a statute, or violation of an established industry standard.

In Imperial Ice, California adopted the traditional rule, holding that an action for interference arises upon unjustifiably inducing a breach of contract. In reevaluating this position, the Court emphasized the need to distinguish claims for the tortious disruption of an existing contract and claims that a prospective contractual or economic relationship was prevented by the defendant. In the former, damages are available against third party conduct intended to disrupt an existing contract because an enforceable contract exists. In the latter, no enforceable contract exists because the contractual or economic relationship is merely prospective or potential.