Roy Allan Slurry Seal, Inc. v. Amer. Asphalt So., Inc.

Filed 2/20/15

CERTIFIED FOR PUBLICATION

IN THE COURT OF APPEAL OF THE STATE OF CALIFORNIA

SECOND APPELLATE DISTRICT

DIVISION EIGHT

ROY ALLAN SLURRY SEAL, INC., et B255558

al.,

(Riverside County Super.

Plaintiffs and Appellants. Ct. No. RIC1308832)

v.

AMERICAN ASPHALT SOUTH, INC.,

Defendant and Respondent,

APPEAL from a judgment of the Superior Court of Riverside County. Richard J.

Oberholzer, Judge. Affirmed in part, reversed in part and remanded with directions.

Doyle & Schafer, Daniel W. Doyle and David Klehm for Plaintiffs and

Appellants.

Atkinson, Andelson, Loya, Ruud & Romo, Scott K. Dauscher, Paul G. Szumiak

and Jennifer D. Cantrell, for Defendant and Respondent.

__________________________

INTRODUCTION

May the second-place bidder on a public works contract state a cause of action for

intentional interference with prospective economic advantage against the winning bidder

if the winner was only able to obtain lowest bidder status by illegally paying its workers

less than the prevailing wage? We hold that the answer is yes if the plaintiff alleges it

was the second lowest bidder and therefore would have otherwise been awarded the

contract, because that fact gives rise to a relationship with the public agency that made

plaintiff’s award of the contract reasonably probable.

FACTS AND PROCEDURAL HISTORY

Between 2009 and 2012 American Asphalt South, Inc. (American), outbid either

Roy Allan Slurry Seal, Inc. (Allan), or Doug Martin Contracting, Inc. (Martin), on

23 public works contracts totaling more than $14.6 million to apply a slurry seal

protective coating to various roadways throughout Los Angeles, San Bernardino,

Riverside, Orange, and San Diego Counties.1

Allan and Martin jointly sued American in those five counties for intentional

interference with prospective economic advantage and other torts, alleging that American

had only been able to submit the lowest bid by paying its workers less than the statutorily

required prevailing wage. (Lab. Code, §§ 1770, 1771 [contractors on public works

projects must pay the prevailing wage, as determined by the Department of Industrial

Relations].) Allan and Martin alleged that each was the second lowest bidder, as to,

respectively, 17 and 6 of the contracts and would have been awarded those contracts as

1 We have reached that figure by rounding the numbers alleged in the pleadings.

The public agencies that awarded the contracts were, as follows: in Los Angeles County

the cities of Pasadena, Claremont, and Downey; in San Bernardino County, the cities of

Fontana, Loma Linda, Colton, Rancho Cucamonga, and Twenty Nine Palms; in Riverside

County, the County of Riverside and the cities of Temecula, Murrieta, Menifee, and

Riverside; in Orange County, the cities of Rancho Santa Margarita and Newport Beach;

and in San Diego County, the cities of La Mesa and Coronado.

Appellants have asked us to take judicial notice of pleadings filed in other cases.

We deny that request.

2

the lowest bidder had American’s bid included labor costs based on the prevailing wage.2

Plaintiffs alleged that each contractor’s material costs were effectively the same and that

the only substantial difference in their bids came from American’s unlawfully deflated

labor costs. Plaintiffs also alleged a cause of action for predatory pricing under the

Unfair Practices Act (Bus. & Prof. Code, §§ 17000 et seq., 17043 (UPA)) and sought an

injunction to enjoin American’s bidding practices under the Unfair Competition Law.

(Bus. & Prof. Code, § 17200 (UCL).)

American demurred to the complaints, contending that plaintiffs did not have the

required existing relationship and reasonable probability of being awarded the contracts

that was required to show intentional interference with prospective economic advantage.

American also contended that the unfair practices and unfair competition claims were

defective on grounds we discuss in detail below.

These demurrers led to conflicting rulings from three trial courts. In July 2013,

the Los Angeles Superior Court overruled American’s demurrers to the intentional

interference with economic advantage and UCL claims, but sustained the demurrer as to

the UPA claim with leave to amend. On November 5, 2013, the Riverside Superior Court

sustained without leave to amend American’s entire demurrer. On November 15, 2013,

the San Diego Superior Court overruled American’s entire demurrer. Plaintiffs appealed

from the Riverside judgment in January 2014, and one week later our Supreme Court

ordered all five matters coordinated for trial in Los Angeles Superior Court and for

appellate purposes in the Second District Court of Appeal.

Plaintiffs contend that the Riverside trial court erred because their bid submissions

created the required economic relationship for the intentional interference with economic

advantage tort.

2 We will refer to Allan and Martin collectively as plaintiffs.

3

STANDARD OF REVIEW

In reviewing a judgment of dismissal after a demurrer is sustained without leave to

amend, we assume the truth of all facts properly pleaded by the plaintiff-appellant.

Regardless of the label attached to the cause of action, we examine the complaint’s

factual allegations to determine whether they state a cause of action on any available

legal theory. (Doe v. Doe 1 (2012) 208 Cal.App.4th 1185, 1188.) We do not assume the

truth of contentions, deductions, or conclusions of law or fact and may disregard

allegations that are contrary to the law or to a fact that may be judicially noticed. (Ibid.)

To the extent issues of statutory construction are raised, we apply the rules of

statutory construction and exercise our independent judgment. Our first task in

construing a statute is to ascertain the Legislature’s intent in order to carry out the

purpose of the law. If the statutory language is clear and unambiguous, no judicial

construction is required. If the statute is ambiguous, the words must be construed in

context and in light of the statutory purpose. (Doe v. Doe 1, supra, 208 Cal.App.4th at

p. 1189.)

DISCUSSION

1. The Tort of Intentional Interference With Prospective Economic Advantage

The tort of intentional interference with prospective economic advantage

(intentional interference) provides a remedy to those “who suffer[] the loss of an

advantageous relationship” due to the actions of “a malicious interloper.” (Zimmerman v.

Bank of America (1961) 191 Cal.App.2d 55, 57.) “[T]he mere fact that a prospective

economic relationship has not attained the dignity of a legally enforceable agreement

does not permit third parties to interfere with performance.” (Buckaloo v. Johnson

(1975) 14 Cal.3d 815, 827 (Buckaloo), disapproved on other grounds in Della Penna v.

Toyota Motor Sales, U.S.A., Inc. (1995) 11 Cal.4th 376, 393, fn. 5.) The tort is

considerably more inclusive than actions for interference with contract, and therefore

4

does not depend on the existence of a valid contract. (Korea Supply Co. v. Lockheed

Martin Corp. (2003) 29 Cal.4th 1134, 1157 (Korea Supply).)

In order to state a cause of action for this tort, a plaintiff must allege five elements.

First, the existence of an economic relationship with some third party that makes it

reasonably probable the plaintiff will gain some future economic benefit. This protects

the expectation that the relationship will eventually produce the desired benefit, not the

speculative expectation that a potentially beneficial relationship will arise. (Korea

Supply, supra, 29 Cal.4th at p. 1164.)

Second, the defendant must have knowledge of the plaintiff’s economic

relationship. (Korea Supply, supra, 29 Cal.4th at p. 1164.)

Third, the defendant must have engaged in wrongful acts designed to disrupt the

plaintiff’s relationship. This requires allegations that the defendant engaged in an

independently unlawful act separate and apart from the acts of interference and that the

defendant either intended to interfere or acted with the knowledge that interference was

certain or substantially certain to occur. (Korea Supply, supra, 29 Cal.4th at pp. 1164-

1165.) This does not require that the plaintiff have been identified by name, however,

and it is enough that the defendant was aware its actions would frustrate the legitimate

expectations of a specific, albeit unnamed, party. (Ramona Manor Convalescent

Hospital v. Care Enterprises (1986) 177 Cal.App.3d 1120, 1132-1133.)

Fourth, plaintiffs’ economic relationship was actually disrupted. (Korea Supply,

supra, 29 Cal.4th at p. 1165.)

Fifth, plaintiffs suffered economic harm that was proximately caused by

defendant’s interference. (Korea Supply, supra, 29 Cal.4th at p. 1165.)

2. Plaintiffs, as the Lawful And Second Lowest Bidders, Had a Reasonably Probable

Economic Expectancy that They Would be Awarded the Contracts

The competitive bidding laws for public works contracts are designed to protect

the public, not bidders. (See Konica Business Machines U.S.A., Inc. v. Regents of

University of California (1988) 206 Cal.App.3d 449, 456; Universal By-Products, Inc. v.

5

City of Modesto (1974) 43 Cal.App.3d 145, 152.) Therefore while public agencies are

generally expected to accept the bid of the lowest responsible bidder, they still have

discretion to reject all bids or accept one of multiple bids that have tied as the lowest.3

(Pub. Contract Code, §§ 10122, subd. (d), 20166, 22038, subd. (b).)

Based on appellate decisions applying this principle in various contexts, which we

discuss post, American contends that losing bidders are barred from suing their

successful competitors for intentional interference because there was no existing

relationship with which to interfere and no reasonable probability that any contract would

ever have been awarded.

No reported California decision has reached this issue. We turn for guidance to

two decisions of the California Supreme Court: Korea Supply, supra, 29 Cal.4th 1134,

and Buckaloo, supra, 14 Cal.3d 815. The Buckaloo court, which first articulated the

elements of the intentional interference tort, noted that the tort could be established by

showing interference with a contract “which is certain to be consummated.” (Buckaloo,

at p. 823, fn. 6, citing Builders Corporation of America v. United States (N.D. Cal. 1957)

148 F.Supp. 482, 484, fn. 1, rev’d. on other grounds (9th Cir. 1958) 259 F.2d 766.)

Drawing upon this principle, the Korea Supply court considered the pleading

requirements of an intentional interference cause of action brought by the agent of the

losing bidder on a contract to supply military radar equipment to the government of South

Korea. The agent alleged that the winning bidder obtained the contract by providing

bribes and sexual favors to key Korean officials, in violation of the federal Foreign

Corrupt Practices Act. (15 U.S.C. § 78dd-2.) The agent alleged that its principal’s

product was superior and its bid was significantly lower than defendant’s bid, that but for

defendant’s misconduct its principal would have been awarded the contract, and that as a

result the agent lost the commission it would have otherwise obtained.

3 A responsible bidder is one “who has demonstrated the attribute of

trustworthiness, as well as quality, fitness, capacity, and experience to satisfactorily

perform the public works contract.” (Pub. Contract Code, § 1103.)

6

The trial court sustained the defendant’s demurrer without leave to amend, but the

Court of Appeal reversed, in part because it concluded the plaintiff did not have to plead

and prove that the defendant acted with the specific intent to interfere with the plaintiff’s

business expectancy. Korea Supply dealt primarily with that issue, agreeing with the

Court of Appeal that specific intent to disrupt a plaintiff’s business expectancy was not an

element of the intentional interference tort. (Korea Supply, supra, 29 Cal.4th at pp. 1156-

1157.)

The Korea Supply court went on to discuss the elements of the intentional

interference tort and how they limit the class of potential plaintiffs. In regard to the

existence of an economic expectancy, the Korea Supply court held that one existed even

though the plaintiff agent did not allege that it had a contractual agreement with its

principal, and instead “merely alleged that it had an economic expectancy in that it was

acting as [the principal’s broker] and it expected a commission if the contract was

awarded . . . .” (Korea Supply, supra, 29 Cal.4th at p. 1157.) In regard to proximate

cause, the Korea Supply court recounted plaintiff’s allegations that its principal would

have been awarded the contract absent defendant’s misconduct, leading directly to

plaintiff’s lost commission. Those allegations were sufficient to establish proximate

cause. (Id. at pp. 1165-1166.)

Elsewhere in the decision, the Korea Supply court recognized that the plaintiff was

an indirect victim of the defendant’s alleged misconduct. (Korea Supply, supra,

29 Cal.4th at pp. 1162-1163.) This makes sense because in order to interfere with the

plaintiff-agent’s expectation of receiving a commission, the defendant had to first derail

acceptance of the principal’s superior bid. Essential to Korea Supply’s proximate cause

discussion, therefore, is the notion that the defendant intentionally interfered with the

losing bidder’s viable contractual expectancy.4

4 We recognize that Korea Supply did not directly reach this issue, but whether by

design or an intuitive leap of logic, it seems inescapable to us that the Korea Supply

plaintiff’s ability to show proximate cause rested on this notion.

7

We see little functional difference between the allegations concerning the

unsuccessful bidder in Korea Supply and those made by plaintiffs in this case. Plaintiffs

here alleged that as the second lowest bidders they would have been awarded the

contracts but for American’s interference. Implicit in this is the allegation that the

various public entities were required to award the contract to the lowest responsible

bidder and that plaintiffs satisfied all the requirements necessary to qualify for those

contracts.5 Although plaintiffs here did not submit the lowest bids, that was alleged to be

due solely to American’s violation of its statutory obligation to pay its workers the

prevailing wage. As in Korea Supply, absent that alleged misconduct it was plaintiffs

who in fact submitted the true and lawful lowest bids.

Citing Pacific Architects Collaborative v. State of California (1979)

100 Cal.App.3d 110, 121-122 (Pacific Architects), Swinerton & Walberg Co. v. City of

Inglewood-L.A. County Civic Center Authority (1974) 40 Cal.App.3d 98, 101

(Swinerton), Rubino v. Lolli (1970) 10 Cal.App.3d 1059, 1062 (Rubino), and Charles L.

Harney, Inc. v. Durkee (1951) 107 Cal.App.2d 570, 580 (Harney), American contends

that a disappointed bidder has no legally protectable expectancy interest in being awarded

a contract. We first summarize the four cases and then conclude they are inapplicable

here.

The plaintiff in Pacific Architects, supra, 100 Cal.App.3d 110, sued the state to

recover its bid preparation costs and lost profits when it submitted the lowest bid, but the

state rejected all bids after discovering it had insufficient funds for the project. Based on

the state’s discretion to reject all bids, the appellate court affirmed a summary judgment

for the state, holding that government immunity protected it from tort liability and that

promissory estoppel was not available as a remedy either. (Id. at pp. 121-122, 124.)

The plaintiff in Rubino, supra, 10 Cal.App.3d 1059, submitted the lowest bid on a

state project and sued the director of the agency after the contract was awarded to another

5 Plaintiffs allege, and American does not dispute, that the basic principle of public

contracting law applies here – if a contract is awarded, it must be awarded to the lowest

responsible bidder.

8

bidder. The Rubino court held that the ability to reject and award bids vested the director

with discretion, and that his abuse of that discretion qualified for government immunity

in a tort action for damages. (Id. at p. 1062.) Even so, the Rubino court noted that a

mandate action might have been available to restrain the agency from awarding the

contract if the agency abused its discretion. (Ibid., citing Baldwin-Lima-Hamilton Corp.

v. Superior Court (1962) 208 Cal.App.2d 803, 824-826.)

The plaintiff in Swinerton, supra, 40 Cal.App.3d 98, was the lowest bidder on a

project and sued the public agency in tort and for promissory estoppel when the contract

was awarded to someone else. Although Rubino’s government immunity principles

applied to the tort claim against the public agency (id. at pp. 101-102), promissory

estoppel was held available to compensate the plaintiff for its bid preparation costs. (Id.

at pp. 103-105.) In particular, the Swinerton court noted, despite the public agency’s

discretion to reject all bids, allowing recovery under a promissory estoppel theory was

important to prevent making the agency’s promise to award the contract to the lowest

bidder illusory and “render the whole competitive bidding process nugatory.” (Id. at

p. 104.) Significantly, the plaintiff was allowed to state a cause of action against the

winning bidder for conspiring with the agency to award it the contract. (Id. at p. 106.)

The plaintiff in Harney, supra, 107 Cal.App.2d 570, was the lowest bidder on a

public works project, but its bid was nearly 18 percent over the agency’s initial estimate.

When the agency discovered that its calculations were wrong, it rejected all the bids and

then revised its estimate and took new bids. The plaintiff brought a mandate action

seeking to compel the agency to award it the contract, but the appellate court held that

bidders on public works contracts had no right to be awarded the contract where the

statute gave the agency discretion to reject all the bids. (Id. at p. 580.)

We believe these four decisions have no application here. Each in some measure

rests on government immunity principles arising from an agency’s discretion to reject or

accept bids. Two – Swinerton and Rubino – recognized that the lowest bidder in fact has

an enforceable right in mandate to stop a public agency from improperly awarding a

contract. Our Supreme Court later endorsed Swinerton’s promissory estoppel rationale.

9

(Kajima/Ray Wilson v. Los Angeles County Metropolitan Transportation Authority

(2000) 23 Cal.4th 305, 314-317.) None of American’s authorities involved an intentional

interference claim brought by a losing bidder against the winning bidder, but Swinerton

did endorse a tort remedy on a conspiracy theory against the winning bidder.

Nor is this a case where the public agency exercised its discretion to reject all bids.

As alleged, the public agencies in fact awarded the 23 disputed contracts to the company

they were duped into believing was the lowest responsible bidder in each instance.

Furthermore, the bidder-versus-public agency decisions are based on the principle that

the public contracting laws are designed to protect the public. While that policy makes

sense in order to protect taxpayers from damage awards against a public agency on top of

the contract price that went to the successful bidder, its application in this context is far

from clear. This action seeks damages from only the winning bidder and therefore does

not call for protection of the public. And while taxpayers gain some financial benefit by

contracting with businesses that pay less than the statutorily required prevailing wage,

American does not contend, and we believe no court would hold, that such an advantage

is worthy of judicial protection.

Relying on Westside Center Associates v. Safeway Stores 23, Inc. (1996)

42 Cal.App.4th 507 (Westside Center), American also contends plaintiff’s intentional

interference cause of action fails because it “must have interfered with a specific existing

relationship, not simply with the formation of one in the future.” (Id. at p. 525.) Implicit

in this contention is the notion that no economic expectancy exists until a bid is accepted.

We do not believe Westside Center is applicable here. The plaintiff in that case

was a shopping center owner. The anchor tenant was Safeway. Ownership of the center

was fragmented and the Safeway store property was owned by a separate trust. The

plaintiff sued Safeway for intentional interference, alleging that after Safeway closed its

store in the center, Safeway renewed its lease option for another five years with the intent

to drive down the price of the center as its store sat vacant and then buy it at a reduced

price.

10

Plaintiff alleged two types of interference: (1) with its attempt to purchase the

Safeway property from the trust; and (2) a theory of “interference with the market” based

on the claim that Safeway’s conduct interfered with plaintiff’s ability to negotiate with an

unidentified class of all potential buyers. It was the latter group of speculative,

unidentified potential tenants to whom the Westside Center court referred when holding

that a specific, existing relationship was required. (Westside Center, supra,

42 Cal.App.4th at pp. 523-527.) As for plaintiff’s failed negotiations with the trust, the

issues on appeal concerned the trial court’s findings that there was no evidence Safeway

intended to disrupt a known relationship and that plaintiff’s damages were speculative,

findings that the Court of Appeal affirmed. (Id. at pp. 529-530.)

We conclude that plaintiffs, as the alleged lawful lowest bidders, had a tangible

expectancy the contracts would be theirs, an expectation that was thwarted only by

American’s unlawful conduct. As Korea Supply suggests, a bidder on a government

contract who submits a superior bid and loses out only because a competitor manipulated

the bid selection process through illegal conduct has been the victim of actionable

intentional interference. This is consistent with the notion that the true lowest bidder may

bring a mandate action to compel the public agency to reverse its previous decision

improperly awarding a contract. Absent some enforceable right, such mandate actions

would not be possible.6

The dissent complains that we have employed a temporally backward analysis by

relying on American’s alleged wrongful conduct to create an existing economic

relationship where none otherwise exists. We cannot agree. Instead, we conclude that an

actionable economic expectancy arises once the public agency awards a contract to an

unlawful bidder, thereby signaling that the contract would have gone to the second lowest

qualifying bidder. We see no reason to cut off any legal effect from the winning bidder’s

misconduct simply because it precedes the completion of the bidding process. Assuming

6 Where, as alleged here, the misconduct was not discovered for some time, a

mandate action to halt the contract award was not feasible, leaving plaintiffs with no

other remedy.

11

that the timing had some legal significance, the defendant’s wrongful conduct persists

throughout the bidding process, well past the time when it is wrongly awarded the public

works contract. In short, by continuing its unlawful conduct after wrongly winning the

contract, the defendant interferes with an expectancy that would have otherwise

materialized.

We also observe that under Korea Supply, any subcontractors plaintiffs had lined

up would have at least as great an economic expectancy as did the plaintiff-agent in that

case. Under the dissent’s reasoning, however, our plaintiffs would not. As stated before,

Korea Supply implicitly rejects that result.

American contends that recognizing the intentional interference tort in this case is

bad public policy because it will open the floodgates to actions by disappointed bidders

and will lead to the release of a defendant’s confidential and proprietary trade

information through pretrial discovery. This argument was expressly rejected by the

court in Korea Supply when it said, “We do not share the concern of Lockheed Martin

and the concurring and dissenting opinion that our ruling today will expose defendants to

an unlimited number of potential plaintiffs.” (Korea Supply, supra, 29 Cal.4th at

p. 1163.) In any event, we limit our holding to losing bidders who can show they were

the actual and lawful lowest bidders on a public works project.7

7 As we discuss in Section 4, post, the Legislature provides for civil actions against

winning bidders of public works contracts obtained by violation of the laws requiring

them to furnish workers compensation and unemployment insurance. (Lab. Code,

§ 1750; Pub. Contract Code, §§ 19102, 20104.70.) This statutory scheme reflects a

legislative statement that private tort claims are reasonable tools in the protection of

employees’ rights. By implication, these statutes reject American’s floodgate argument.

We also observe that liability under those statutes extends to a far broader

category of potential plaintiffs – not just the second place bidder, but also various

subcontractors and other businesses that would have benefitted had the losing bidder

obtained the contract. Even with that breadth, there are no reported appellate cases that

discuss tort claims filed under those statutes. It may be that the requirement in those

provisions of a criminal conviction as prerequisite to suit places a statutory damper on

such claims.

12

We believe that sound policy reasons support our recognition that the intentional

interference tort applies here. The central purpose of the prevailing wage law is to

protect and benefit employees on public works projects. (Road Sprinkler Fitters Local

Union No. 669 v. G & G Fire Sprinklers, Inc. (2002) 102 Cal.App.4th 765, 776.) It also:

serves to protect employees from substandard wages that might be paid by contractors

who recruit labor from distant cheap-labor areas; lets union contractors compete with

non-union contractors; benefits the public through the superior efficiency of well-paid

workers; and compensates private sector workers with higher wages to make up for the

absence of job security and employment benefits enjoyed by public employees. (Ibid.)

Even though violators who are caught may face civil penalties and assessments (Lab.

Code, § 1741), and may be sued by employees who did not receive the prevailing wage

(Road Sprinklers, supra, at p. 777), allowing actions like plaintiffs’ to proceed will

further promote these goals by adding an extra disincentive to discourage unscrupulous

contractors from violating the prevailing wage laws. It also provides an additional level

of scrutiny to bidding practices by unsuccessful bidders. Taxpayers are not at risk from

damage awards in such cases. Whether a plaintiff was in fact the second lowest bidder

and would have been awarded a contract had the winning bidder complied with the

prevailing wage law is a factual issue susceptible to standard civil discovery practices and

is amenable to proof at trial.8

Most important, a contrary decision would not be limited to actions against

contractors who obtain public agency contracts by violating the prevailing wage laws. If

we affirm, we would effectively hold that no losing bidder could ever sue a competitor

for interfering with the bidding process no matter how egregious the misconduct because

8 A defendant’s alleged failure to pay the prevailing wage is calculable because that

rate is established by the Department of Industrial Relations. (Lab. Code, § 1770.)

Whether a plaintiff was the second lowest bidder and whether the public agency would

have awarded a particular contract to that plaintiff can be established by conducting

discovery of the relevant officials involved in the bidding and contract award process.

13

no economic relationship exists until and unless its bid is accepted.9 It does not require

much imagination to envision a contractor who obtains a public works contract by

bribery, extortion, or familial connections. (See Korea Supply, supra, 29 Cal.4th 1134,

1140 [bribes and sexual favors].) At bottom, the intentional interference tort was

designed to protect an economic expectancy that showed a reasonable probability of

coming into being. A bidder on a public agency contract who in fact submits the lawful

lowest bid has such an expectancy, and it should not be thwarted by a competitor’s illegal

conduct.10

3. Decisions from Other States Expressly or Implicitly Permit Losing Bidders to Sue

for Intentional Interference

American cites three decisions from other jurisdictions to support its contention

that an intentional interference cause of action is not allowed under these circumstances,

and urges us to follow those cases and to decline to extend the tort. Close examination of

those decisions undercuts American’s reliance on those cases.

The first is Powercorp Alaska, LLC v. Alaska Energy Auth. (Alaska 2013)

290 P.3d 1173 (Powercorp).) The plaintiff in Powercorp manufactured components used

to improve the operation of power generation plants. It sued a public agency that

9 Although we rule in the context of public agency contracts, we note that under

American’s reasoning there is even less chance of establishing an actionable economic

expectancy where bidding on private contracts is concerned. At least public agencies

must accept the lowest responsible bid, a factor that we find significant here, where

plaintiffs were in fact the responsible lowest bidders. Where private bidding is

concerned, restraints may not apply.

10 We asked the parties to provide supplemental briefs on the following issues:

(1) whether a losing bidder’s past history of successful bids to a public agency creates an

existing economic relationship; (2) if so, whether plaintiffs could allege that fact here;

and (3) if so, whether plaintiffs should be allowed to amend their pleadings accordingly.

Both parties essentially agree that a past history of successful bids, in and of itself, is

insufficient to create an existing economic relationship, and we agree. We do believe that

fact may be relevant in determining whether plaintiffs were “responsible bidders,” under

the public contracts statutes (Pub. Contract Code, § 1103), and also may be relevant to

the element of proximate causation.

14

awarded a contract to a competitor, along with a public agency employee who allegedly

disclosed trade secrets in order to assist the competitor in the bidding process. In

affirming summary judgment for the employee on a cause of action for intentional

interference, the Alaska Supreme Court noted that the submission of a bid entitles the

bidder to only fair and honest consideration and does not “provide any one bidder with a

contract expectancy superior to the rights of other bidders.” (Id. at p. 1187, fn. omitted.)

Based on this language, American contends that Powercorp supports its claim that

plaintiffs had no valid contract expectancy. However, in the next sentence the

Powercorp court holds: “In this case, Powercorp did not submit a bid; the bid-protest

hearing officer concluded that ‘Powercorp could have responded, substituting [the

preferred controller] for its own controller, but it chose not to because . . . it is not

interested in building systems using other controllers.’ Powercorp has not produced other

evidence to contradict the hearing officer’s conclusion. Powercorp has not shown that

but for [the defendant employee’s] interference, it expected to enter a contract with [the

public agency] from which it would derive economic benefits.” (Powercorp, supra,

290 P.3d at p. 1187.) We understand American’s reliance on the former passage, but the

latter casts some doubt on what part it played in the court’s holding. If, as the latter

quoted portion suggests, no expectancy arose because the plaintiff never actually bid on

the project, then arguably Powercorp can be read to endorse intentional interference

claims when a bid has been submitted.

Furthermore, Powercorp appears at odds with an earlier Alaska Supreme Court

decision: J & S Services, Inc. v. Tomter (Alaska 2006) 139 P.3d 544 (Tomter). The

plaintiff in Tomter was the unsuccessful bidder on a contract to lease an airplane to a state

firefighting agency. The plaintiff sued the agency and its director of aviation, alleging

that the director held a grudge against it and wrongfully steered the contract to a friend’s

company. Although the action was barred as to the state because an exclusive statutory

remedy existed, the Alaska Supreme Court held that an intentional interference cause of

action might be viable against the director for misconduct committed outside his official

15

capacity, and allowed the plaintiff leave to amend to flesh out his allegations of

wrongdoing. (Id. at pp. 551-552.)

The second decision cited by American is Cedroni Assocs. v. Tomblinson,

Harburn Assocs., Architects & Planners, Inc. (2012) 492 Mich. 40 (Cedroni). The

plaintiff in Cedroni was the lowest bidder on a school construction project. Plaintiff sued

the school district’s architect for intentional interference, contending that the architect

acted out of spite when it recommended the contract be awarded to another.

In affirming a summary judgment for the architect, the Michigan Supreme Court

held that the absence of a contractual expectancy arose from the same principles that

prevented a losing bidder from suing the public agency that awarded the bid to someone

else. (Cedroni, supra, 492 Mich. at pp. 46-47.) However, this holding was augmented

by additional factors: in its request for proposals, the school district expressly retained

authority to reject any or all bids, stated that it might not necessarily award the contract to

the lowest bidder, and made it clear that the architect would play a role in determining

whether a bidder was “responsible” under the applicable statutes. (Id. at pp. 48-50.) The

public agency also found that the plaintiff was not a responsible contractor. (Id. at p. 53.)

It was under these circumstances that the Cedroni court held the plaintiff’s status

as lowest bidder did not create a valid contractual expectancy for purposes of the

intentional interference cause of action. (Id. at pp. 52-54.) We find Cedroni

distinguishable because the only one of the Cedroni factors present here was the public

entities’ ability to reject all bids, a factor we believe was ameliorated once the public

entities here chose to accept what they believed were the lawful lowest bids.

Furthermore, one federal court applying Michigan law distinguished Cedroni in a case

where the defendant’s wrongful interference occurred after plaintiff’s bid had been

unveiled as the lowest one and the public agency had begun negotiations to finalize the

deal. (360 Constr. Co. v. Atsalis Bros. Painting Co. (E.D. Mich. 2012) 915 F.Supp.2d

883, 900-901.) Another federal court applying Michigan law held that a valid business

expectancy arose when the plaintiff produced evidence that it had supplied the only

16

qualifying bid. (Maiberger v. City of Livonia (E.D. Mich. 2010) 724 F.Supp.2d 759,

778.)

The third decision cited by American is Duty Free Ams., Inc. v. Estée Lauder Co.

(S.D. Fla. 2013) 946 F.Supp.2d 1321 (Duty Free). The plaintiff in Duty Free, an operator

of duty-free stores in airports, sued one of its former suppliers for intentional interference

with the plaintiff’s bids to obtain additional airport retail outlets, alleging that the supplier

violated federal antitrust laws by making disparaging comments about plaintiff.

Applying Florida law, the Duty Free court held that the plaintiff failed to state a claim for

tortious interference based solely on its bids to obtain more retail space because the mere

fact of making a bid did not create a protectable business relationship. (Id. at pp. 1338-

1339.)

While American points to that portion of the Duty Free decision, it omits the rest

of the analysis, which noted that the plaintiff was not bidding with an entity that was

required to accept the lowest bid and that a protectable business relationship might exist

in those situations. (Duty Free, supra, 946 F.Supp.2d at p. 1339.) The plaintiff might

have also succeeded, the court noted, had it alleged additional facts indicating that the

relationship went beyond the bidding process into negotiations which likely would have

been completed. (Ibid.)

Not only do the three sister-state decisions cited by American either reject or at

least undercut its contentions, our research has turned up decisions from several

jurisdictions that either expressly or by implication allow the cause of action, and none

that expressly forbids it.

In Killian Construction Company v. Jack D. Ball & Associates (Mo.App. S.D.

1993) 865 S.W.2d 889, a Missouri appellate court held that the disappointed bidder on a

school construction project could state a claim for intentional interference against the

successful bidder and the school district’s architectural consultant, alleging that it had

been the lowest bidder but lost the contract due to certain misconduct by defendants.

Directly addressing whether a valid business expectancy existed under those

circumstances, the Killian court held that the losing bidder’s inability to establish a

17

binding contractual relationship with the public agency did not preclude the bidder from

showing a protectable business relationship based on its status as the lowest bidder.

“Based upon the facts in the petition, a business expectancy was shown. Under normal

circumstances it would be expected that a school district, in order to save $24,000, would

make its contract with plaintiff, and not [the other bidder]. Where a proper bid is made,

we cannot say as a matter of law that the lowest bidder by a substantial amount could not

have a valid business expectancy that it would receive the contract if awarded.” (Id. at

p. 892.)

In R. S. Noonan, Inc. v. School District of City of York (1960) 400 Pa. 391, the

Pennsylvania Supreme Court held that the losing bidder for a school construction project

could not bring what was essentially a taxpayer’s mandate action to compel the school

district to award it the contract. The plaintiff also sued the school district’s architect for

interfering with the bidding process. Albeit with no real discussion, the court held that

the architect’s actions were privileged, but added that the “allegation sounds in tort, for

which there is an adequate remedy at law.” (Id. at p. 396.)

In National R.R. Passenger v. Veolia Transportation Services (D.C.C. 2009)

592 F.Supp.2d 86, Amtrak sued another rail company for interfering with its bid to

provide railway services in Florida. Applying District of Columbia law, the National

R.R. Passenger court held that Amtrak could state a cause of action for intentional

interference. On the issue of whether a valid business expectancy existed, the court held

that Amtrak succeeded by alleging it had a legitimate expectation of winning the contract

because it met the bid requirements, had highly qualified employees, had an opportunity

to acquire the Florida rail company as a new customer, and was the only other bidder.

(Id. at p. 98.)

Other courts have disallowed intentional interference claims by losing bidders, but

not because they were unable to establish a valid business expectancy. Instead, these

decisions turned on other pleading defects, at least suggesting that absent those defects

the claims would survive. (Technology for Energy Corp. v. Scandpower, A/S (6th Cir.

1989) 880 F.2d 875 [applying California law, held losing bidder on contract to supply

18

nuclear reactor technology failed to state cause of action for intentional interference

against competitor because allegations did not show proximate cause, namely that but for

misconduct it was reasonably probable the business expectancy would have

materialized]; Soderlund Bros. v. Carrier Corp. (1995) 278 Ill.App.3d 606 [summary

judgment for defendant bidder affirmed where evidence showed its conduct was

privileged]; Boyle Service v. Dewberry Design Group (Okla.Civ.App. Div.3 2001)

24 P.3d 878 [summary judgment for defendant project architect and engineer affirmed

where evidence showed they did not intend to interfere with prospective economic

advantage]; Bard Tree Co. v. City of Oak Ridge (Tenn. 2010) 326 S.W.3d 156 [summary

judgment granted for defendants who allegedly interfered in plaintiff’s tree trimming bid;

the plaintiff never submitted a valid bid].)

4. The Statutory Remedies for Certain Unsuccessful Bidders are not Exclusive

In 1991 the Legislature added two provisions to the Public Contract Code that

allowed the second lowest bidder on certain public works contracts to sue and seek

damages from a successful bidder who obtained the contract through violations of the

laws concerning workers compensation and unemployment insurance: Public Contract

Code sections 19102 and 20104.70. The statutes require criminal convictions as a

prerequisite to civil suit. (Stats. 1991, c. 906 (A.B. 1754), § 3.)

Public Contract Code sections 19102 and 20104.70 are identical. They provide:

“(a) (1) The second lowest bidder, and any person, firm, association, trust,

partnership, labor organization, corporation, or other legal entity which has, prior to the

letting of the bids on the public works project in question, entered into a contract with the

second lowest bidder, may bring an action in superior court if that entity suffers damages

as a result of the bid of the second lowest bidder not being accepted due to the successful

bidder’s violation, as evidenced by the conviction of the successful bidder thereof, of any

provision of Division 4 (commencing with Section 3200) of the Labor Code [workers

compensation laws] or of the Unemployment Insurance Code, or of both.”

19

Subdivision (c)(2) defines the second lowest bidder as “the second lowest qualified

bidder deemed responsive by the public agency awarding the contract for public work.”

American contends that these two statutes evince a comprehensive statutory

scheme whose omission of claims based on violations of the prevailing wage law shows

that the statutory remedies are exclusive and therefore bar plaintiffs’ intentional

interference claims. Plaintiffs contend that the legislative history of these provisions does

not show such intent. American counters that under the rules of statutory construction:

(1) the Legislature could have provided a remedy for prevailing wage violations but

chose not to do so, indicating its intent to preclude those claims; (2) the Legislature’s

creation of these statutory rights shows they were intended to be exclusive, thus barring

intentional interference claims that are perpetrated by means of other kinds of wrongful

conduct; and (3) the allowance of claims based on only two worker protection laws

shows an intent to exclude all others.11

After reviewing the legislative history, we have no doubt that the Legislature did

not intend to include prevailing wage violations as a basis for recovery under Public

Contract Code sections 19102 and 20104.70. An Assembly committee report prefaced its

analysis of the proposed legislation with the statement that “[e]xisting law requires the

payment of prevailing wages to workers employed by private contractors on public works

projects valued at $1,000 or more. When a public agency (awarding body) decides to

advertise a public works contract, it must obtain the applicable prevailing rates from the

Director of Industrial Relations (DIR), and include them in the advertisement of the bids

and the contract. Other mandatory requirements of successful bidders include workers

compensation coverage and unemployment insurance for workers. [¶] This bill would

11 The parties also cite, and the trial court relied on, Labor Code section 1750, which

is identical in all material respects to the two Public Contract Code sections with one

notable exception: Labor Code section 1750 applies to only a class of public works

projects that does not include street repairs. (Lab. Code, § 1750, subd. (b)(1) [applicable

to construction, repair, remodeling, and other similar tasks performed on public buildings

or structures].) It is therefore inapplicable here.

20

permit any . . . bidder for a public works contract to file a civil action against competitors

when it has suffered damages as a result of losing bids to competitors who knowingly

violate statutory requirements to provide unemployment insurance or workers’

compensation insurance to employees.” (Assem. Com. on Labor and Employment, Rep.

on Assem. Bill No. 1754 (1991-1992 Reg. Sess.) May 1, 1991, p. 1.)12

We observe that two bill analyses suggested that a new cause of action was being

created where none existed. One report described the proposed legislation as “creat[ing]

a statutory cause of action for damages.” (Sen. Com. on Judiciary, Rep. on Assem. Bill

No. 1754 (1991-1992 Reg. Sess.) Aug. 27, 1991, p. 3.) Another stated that second lowest

bidders currently had no recourse if they lost out on a contract award because a

competitor violated the workers compensation and unemployment insurance laws. (Cal.

Dept. of Employment Development, Enrolled Bill Rep. on Assem. Bill No. 1754 (1991-

1992 Reg. Sess.) Sept. 20, 1991, p. 2.) Nothing in the statutes or legislative history

suggests the law applies to interference claims based on prevailing wage violations.

Whatever heft those legislative history fragments might bring to American’s

appellate arguments is outweighed by the “new-right—exclusive remedy” rule of

statutory construction and its counterpart, the doctrine of “preexisting right—cumulative

remedies.” When a statute creates a right that did not exist at common law and provides

a comprehensive and detailed remedial scheme for its enforcement, the statutory remedy

generally is exclusive. (Rojo v. Kliger (1990) 52 Cal.3d 65, 79.) When a statutory

remedy is provided for a preexisting common law right, however, the newer remedy is

considered cumulative, leaving the plaintiff free to elect the older remedy. (Ibid.)

12 The purpose of the bill was to fight the “underground economy” fostered by

businesses that did not pay their fair share of taxes (Assem. Com. on Labor and

Employment, Rep. on Assem. Bill No. 1754 (1991-1992 Reg. Sess.) May 1, 1991, p. 2),

and to help the Employment Development and Industrial Relations departments

investigate and instigate the prosecutions of employers who fail to provide their

employees workers compensation and unemployment insurance. (Cal. Dept. of

Employment Development, Enrolled Bill Rep. on Assem. Bill No. 1754 (1991-1992 Reg.

Sess.) Sept. 20, 1991, p. 2.)

21

Just because we hold that the second lowest bidder on a public works project can

state a cause of action for intentional interference against the successful bidder does not

mean we have created a new cause of action. “The concept that there are no causes of

action except those that have been recognized by precedent, assumed at some point in the

common law, was not accepted generally at early common law, nor is it accepted today.”

(Rosefield v. Rosefield (1963) 221 Cal.App.2d 431, 435; see 5 Witkin, Summary of Cal.

Law (10th ed. 2005) Torts, § 19, p. 73.) A liability is created only by statute where the

liability is embodied in a statute and was “of a type which did not exist at common law.”

(Briano v. Rubio (1996) 46 Cal.App.4th 1167, 1176, quoting Jackson v. Cedars-Sinai

Medical Center (1990) 220 Cal.App.3d 1315, 1320, italics added.) If the liability would

exist in some form regardless of the statute, it is not a liability created by statute.

(Lehman v. Superior Court (2006) 145 Cal.App.4th 109, 118-119.) As a result, because

the intentional interference tort predates the Public Contract Code remedies, those

remedies cannot be deemed exclusive unless there is some expression of legislative

exclusivity.13

We look to the legislative history and the rules of statutory construction to

determine whether the Legislature intended an exclusive remedy. (Imperial Merchant

Services, Inc. v. Hunt (2009) 47 Cal.4th 381, 396-397 [distinguishing cases where intent

to create exclusive remedy rested only on an assumption to that effect, or an inference

drawn from rules of statutory construction].) Neither the statutes nor the legislative

history mentions, much less suggest, that an exclusive remedy was contemplated. At

best, the legislative history is ambiguous on this point.

Ultimately, we turn to the rule of statutory construction that abhors absurd, harsh,

or mischievous results. (Starbucks Corp. v. Superior Court (2008) 168 Cal.App.4th

1436, 1449.) This case is about far more than allowing intentional interference claims

based on a winning bidder’s prevailing wage violations. If the statutory remedies are

exclusive, then they bar all intentional interference claims other than those arising from a

13 The tort of intentional interference with prospective economic advantage dates

back to at least Zimmerman v. Bank of America, supra, 191 Cal.App.2d at p. 57.)

22

winning bidder’s failure to provide workers compensation or unemployment insurance.

It is a well-established rule of statutory construction that the Legislature does not intend

to legislate contrary to existing public policy. (Meninga v. Raley’s, Inc. (1989)

216 Cal.App.3d 79, 89-90.) We refuse to believe that the Legislature intended to

preclude common law causes of action by a second place bidder who lost because, as in

Korea Supply, supra, 29 Cal.4th 1134, the winning bidder plied those in charge of the

bidding process with bribes and sexual favors or, as in this case, by not paying prevailing

wages.14

5. An Independent Wrongful Act Occurred at the Time of Bidding

American contends that its failure to pay the prevailing wage was not an

independently wrongful act for purposes of the intentional interference tort because its

duty to pay those wages did not accrue until work began, long after the bidding process

was over. American relies on Fanelli, Antuzzi, Bonacorsi Painting, Inc. v. Santa Clara

Unified School District (1983) 141 Cal.App.3d 686, 691 (Fanelli) for this proposition.

In Fanelli, supra, the Division of Labor Standards Enforcement sued a painting

contractor and a school district for the contractor’s failure to pay the prevailing wage for

work done for the district. The painter cross-complained against the district for

indemnity, alleging that the district failed to notify the contractor of its prevailing wage

obligations at the time of bidding and by failing to post a wage notice at the jobsite. The

Court of Appeal affirmed a summary judgment for the district on the indemnity issue

because the district had complied with the advance notice requirements by making copies

of the prevailing wage information available at its office. As for the district’s failure to

post a notice at the jobsite, the Fanelli court held that the omission did not cause the

contractor to remain unaware of its prevailing wage obligations because the notice was to

14 What we draw from these provisions is legislative recognition that the rights of

lawful lowest bidders on public works contracts are worthy of protection when those

contracts are obtained due to the winning bidder’s violations of certain laws.

23

be posted at the jobsite, which could only occur after the bidding process ended.

(Fanelli, supra, 141 Cal.App.3d at p. 691.)

We fail to see how Fanelli applies here at all. The obligation to post prevailing

wage notices at a jobsite has nothing to do with a contractor’s obligation to submit a bid

based on the prevailing wage rates. That obligation exists at the time bids are submitted,

and American’s alleged failure to do so in order to obtain contracts under false pretenses

occurred at that point. (San Jose Construction, Inc. v. S.B.C.C., Inc. (2007)

155 Cal.App.4th 1528, 1545 [“[A]n act is independently wrongful if it is unlawful, that

is, if it is proscribed by some constitutional, statutory, regulatory, common law, or other

determinable legal standard . . . .”].)

6. American’s Conduct Was Not Privileged

American contends that its conduct amounted to no more than sharp elbow

competition among business competitors and was therefore privileged. However, the

competition privilege does not apply to unlawful or illegitimate means. (Saunders v.

Superior Court (1994) 27 Cal.App.4th 832, 843.) Obtaining a public works contract by

intentionally violating the prevailing wage laws is clearly unlawful, thereby defeating the

privilege.

7. Duty, Standing, and Proximate Cause Issues

American also contends its demurrer was properly sustained because it had no

duty as to plaintiffs to comply with the prevailing wage laws, plaintiffs have no standing

to enforce those laws, and the proximate cause of the contracts being awarded to

American was the decisions reached by the various public entities, not any misconduct by

American.

These contentions merit little discussion. Plaintiffs do not seek to enforce the

prevailing wage laws; they seek to enforce their right to compete for public works

contracts free of unlawful manipulation by their competitors. The duty American

allegedly breached was the duty to not interfere with plaintiffs’ prospective economic

24

advantage by violating the prevailing wage laws in order to make it appear as if

American were the lowest bidder. Finally, if, as alleged, plaintiffs submitted the true

lowest bids and American was able to misrepresent itself as the lowest bidder by

violating the prevailing wage laws, then that misconduct was the proximate cause of the

public works contracts being awarded to American instead of plaintiffs. (Korea Supply,

supra, 29 Cal.4th at pp. 1165-1166.)

8. The Demurrer Was Properly Sustained as to the UCA Cause of Action

It is unlawful for a business to sell its goods and services below cost with the

intent of harming competition. (Bus. & Prof. Code, § 17043 [“It is unlawful for any

person engaged in business within this State to sell any article or product at less than the

cost thereof to such vendor, or to give away any article or product, for the purpose of

injuring competitors or destroying competition.”]; § 17024 includes “article or product”

to include service].) Here, plaintiffs allege American engaged in predatory pricing by

providing its repaving and road repair services below cost. American demurred to the

cause of action on the grounds that its alleged failure to pay the prevailing wage did not

result in predatory pricing because its lower wages also lowered its costs.

Plaintiffs’ cause of action for predatory pricing misses the mark. Plaintiffs alleged

that American could underbid them because American did not pay its employees the

prevailing wage. The logic of plaintiffs’ complaint was not that American provided its

service below cost, but that American unlawfully reduced its costs by not paying the

prevailing wage, and by doing so could underbid plaintiffs. Selling below cost is

predatory pricing, but lowering one’s costs is not. (Bus. & Prof. Code, § 17043 [“It is

unlawful for any person engaged in business within this State to sell any article or

product at less than the cost thereof . . . .”].) On the other hand, to the extent plaintiffs’

allegation was that American was incurring and paying other costs, such as workers’

compensation and health and pension benefits, which its underbid did not recover – and

thus by implication American was selling its services below cost – the allegation lacks

the required specificity. (Fisherman’s Wharf Bay Cruise Corp. v. Superior Court (2003)

25

114 Cal.App.4th 309, 322 [“To satisfy the requirements of section 17043, a plaintiff must

allege, in other than conclusionary terms, the defendant’s sales price, costs in the product,

and cost of doing business.”]; G.H.I.I. v. MTS, Inc. (1983) 147 Cal.App.3d 256, 275 [“to

satisfy the pleading requirements of section 17043, the plaintiff must allege defendant’s

sales price, its cost in the product and its cost of doing business. [Citation.] And the

various costs must be stated in other than conclusionary terms.”]

9. The Demurrer Was Properly Sustained as to the UCL Cause of Action

Plaintiffs seek injunctive relief ordering American not to violate the prevailing

wage law. Plaintiffs pray for a “A temporary restraining order, a preliminary injunction,

and a permanent injunction, all enjoining defendants from submitting illegally deflated

bids for ‘public works’ projects based on defendant’s lowered labor costs achieved by

failing to pay its employees the ‘prevailing wage’ rate on any and all bids for ‘public

works’ contracts which Plaintiffs also submit bids on.” A third party has standing to sue

a contractor for declaratory and injunctive relief ordering payment of the prevailing

wage. (Monterey/Santa Cruz County etc, v. Cypress Marina Heights LP (2011)

191 Cal.App.4th 1500, 1521 [“Local and union contractors had a beneficial interest in the

enforcement of the prevailing wage requirement because it was intended to benefit

them.”]; see also Vasquez v. State of California (2008) 45 Cal.4th 243, 248-249, 260

[court awarded private attorney general fees to union official pursuing taxpayer action

against the state arising from stipulated injunction to ensure payment of prevailing wage

to state prisoners].)

American demurred on the grounds that plaintiffs failed to allege, and cannot

allege if permitted leave to amend, that plaintiffs would suffer immediate and irreparable

harm unless enjoined. Plaintiffs do not address the requirement to show irreparable harm

required for injunctive relief. Accordingly, we find no error by the trial court in

sustaining American’s demurrer to that cause of action.

26

DISPOSITION

The judgment dismissing plaintiffs’ complaint is reversed. The trial court is

directed to enter a new order overruling American’s demurrer to plaintiffs’ cause of

action for intentional interference with prospective economic advantage, and to sustain

the demurrers as to the causes of action for predatory pricing under Unfair Practices Act

and for an injunction under the Unfair Competition Law. Plaintiffs shall recover their

costs on appeal.

RUBIN, ACTING P. J.

I CONCUR:

FLIER, J.

27

B255558

Roy Allan Slurry Seal, Inc., et al. v. American Asphalt South, Inc.

GRIMES, J. – Concurring in part and dissenting in part.

I concur with the conclusion the trial court properly sustained the demurrer to the

second and third causes of action without leave to amend. I dissent from the conclusion

that plaintiffs have alleged a cause of action for intentional interference with prospective

economic advantage.

To state a claim for intentional interference with prospective economic advantage,

a plaintiff must allege, along with four other elements, “the existence of an economic

relationship with some third party that contains the probability of future economic benefit

to the plaintiff.” (Korea Supply Company v. Lockheed Martin Corp. (2003) 29 Cal.4th

1134, 1164 (Korea Supply).) The principal question presented in this appeal is whether

the plaintiffs, who are bidders on public contracts, have alleged this threshold element of

the tort in their lawsuits against the bidder who won the contracts.

In my view, plaintiffs have not alleged and cannot allege the “existence of an

economic relationship” with the public entities that solicited bids for public works

contracts. Consequently, plaintiffs cannot satisfy the necessary elements of a cause of

action against the winning bidder for interference with prospective economic advantage.

The Supreme Court has enunciated the elements of the tort of intentional

interference with prospective economic advantage many times. Korea Supply is the

Supreme Court’s most recent opinion analyzing the tort. The court described the first

element of the tort this way: “First, a plaintiff . . . must allege the existence of an

economic relationship with some third party that contains the probability of future

economic benefit to the plaintiff. This tort therefore ‘protects the expectation that the

relationship eventually will yield the desired benefit, not necessarily the more speculative

expectation that a potentially beneficial relationship will arise.’ [Citation.] . . . Only

plaintiffs that can demonstrate an economic relationship with a probable future economic

benefit will be able to state a cause of action for this tort.” (Korea Supply, supra, 29

Cal.4th at p. 1164.)

1

The other four elements are these: “Second, a defendant must have knowledge of

the plaintiff’s economic relationship. . . . [¶] Third, the defendant must have engaged in

intentionally wrongful acts designed to disrupt the plaintiff’s relationship. [T]his requires

a plaintiff to plead (1) that the defendant engaged in an independently wrongful act, and

(2) that the defendant acted either with the desire to interfere or the knowledge that

interference was certain or substantially certain to occur as a result of its action. . . .

[¶] . . . Fourth, only plaintiffs that can demonstrate actual disruption of their economic

relationship will be able to state a claim for this tort. . . . [¶] Fifth, a plaintiff must

establish proximate causation,” showing “that the economic harm it suffered was

proximately caused by the acts of the defendant.” (Korea Supply, supra, 29 Cal.4th at

pp. 1164-1165.)

This case concerns only the first element of the tort: whether plaintiffs have

alleged “an economic relationship with a probable future economic benefit . . . .” (Korea

Supply, supra, 29 Cal.4th at p. 1164.) Otherwise stated, did plaintiffs, as bidders on

public works projects, have the requisite “economic relationship with a probable future

economic benefit” with the public entities that solicited the bids?

In my view, the question virtually answers itself, and the answer is “no.” Indeed,

in the context of public works contracts, it is not possible for such a relationship to exist

between the bidder and the public entity soliciting bids because public contract law

forbids it. Even if one could say that the relationship between bidders and the public

entity soliciting bids is an “existing economic relationship” (and I think that is not so),

certainly that relationship cannot, as a matter of law, “contain[] the probability of future

economic benefit” to the bidder. It is antithetical to the principles of competitive bidding

on public works projects that any bidder may expect probable future economic benefit –

none of the bidders has a “probability” of future economic benefit from the contract on

which it is bidding.

This is, of course, a case of first impression, in that there is no California authority

holding that a bidder on a public works contract cannot allege a claim for interference

with prospective economic advantage against the winning bidder. But the authorities

2

plaintiffs cite do not support their position, and the authorities that exist, by analogy,

support my conclusion that a bidder on a public works project has no economic

relationship with the public entity that contains the probability of future benefit.

I begin with Korea Supply, the case upon which plaintiffs principally rely. As

plaintiffs say, they “put their legal eggs in the Korea Supply basket.” But Korea Supply

in no way supports the proposition that a bidder on a public contract has an economic

relationship with the entity soliciting bids.

Korea Supply, of course, did arise in a bidding context. The plaintiff, however,

was not a manufacturer of the product that was the object of the bid and did not submit a

bid. Plaintiff claimed that the defendant winning bidder (Lockheed Martin) induced the

Republic of Korea to award a military equipment contract to it, rather than to a competing

bidder (MacDonald Dettwiler), by offering bribes and sexual favors to Korean officials,

and the contract was awarded to Lockheed Martin despite MacDonald Dettwiler’s

significantly lower bid and superior equipment. I repeat, the plaintiff was not, as here,

the losing bidder. The plaintiff was the broker for the losing bidder. Plaintiff represented

MacDonald Dettwiler in its bid and expected to receive a $30 million commission from

MacDonald Dettwiler if the bid were successful.

In short, the plaintiff broker in Korea Supply clearly had an “economic

relationship with some third party [MacDonald Dettwiler, the losing bidder] that

contain[ed] the probability of future economic benefit” to the plaintiff broker. As Korea

Supply stated: “Here, [the plaintiff broker] had an agency relationship with MacDonald

Dettwiler under which [the broker’s] commission was fixed at 15 percent of the contract

price. As alleged in the complaint, if MacDonald Dettwiler had been awarded the

contract, [the broker’s] commission would have exceeded $30 million. This business

relationship and corresponding expectancy is sufficient to meet this first element.”

(Korea Supply, 29 Cal.4th at p. 1164.)

Nothing in Korea Supply suggests in any way, shape or form that a losing bidder

could sue a winning bidder for interference with prospective economic advantage merely

on the basis of allegations the defendant engaged in wrongful acts to obtain the contract.

3

Nothing in Korea Supply in any way dilutes the requirement to allege facts showing the

first element of the tort: an economic relationship with a third party that contains the

probability of future economic benefit. Such an economic relationship existed between

the broker and the losing bidder in Korea Supply (to the tune of an expected $30 million),

but nothing in Korea Supply suggests that in this case such a relationship existed between

the losing bidders (plaintiffs) and the public entities who awarded the contracts.

Indeed, the first element of the tort was never at issue in Korea Supply, which

addressed an entirely different question: whether the third element of the tort –

intentionally wrongful acts designed to disrupt the plaintiff’s existing economic

relationship – requires a plaintiff to allege the defendant acted with the specific intent to

interfere with the plaintiff’s business expectancy. As noted already, Korea Supply held

the plaintiff need not do so, and that “it is sufficient to plead that the defendant knew that

the interference was certain or substantially certain to occur as a result of its action.”

(Korea Supply, supra, 29 Cal.4th at p. 1153.) This patently has nothing to do with the

need to plead and prove the plaintiff’s business expectancy in the first place.

Likewise, the other case on which plaintiffs rely has nothing to do with whether or

not the plaintiff had an existing economic relationship with the probability of future

benefit. In Settimo Associates v. Environ Systems, Inc. (1993) 14 Cal.App.4th 842, the

plaintiff bidder on two contracts sued the bidder who won the contracts, claiming the

defendant was not properly licensed to perform some of the work called for by the

contracts (which were fully performed). (Id. at p. 844 & fn. 2.) The court did not address

the first element of the tort, simply holding that the lack of a license when the contracts

were awarded “does not amount to actionable unlawful interference with contracts.” (Id.

at p. 846.) The contracts were not public works contracts, and the court observed there

was no statutory authority “requiring a private entity to accept bids only from duly

licensed contractors.” (Ibid.) Settimo also observed that statutory licensing regulations in

the Business and Professions Code “neither create[] nor den[y] any civil remedy to

bidders who lose projects to unlicensed competitors,” and that even though the

defendant’s conduct “amounted to a misdemeanor and foreclosed any possibility of its

4

suing to enforce an awarded contract,” sanctioning such misconduct fell to the

Contractors’ Licensing Board, and the statutory licensing regulations “do not create any

action for civil damages in a competing bidder.” (Settimo, supra, at p. 846.)

In their briefs and in oral argument, plaintiffs consistently have said their

argument rests on Korea Supply, which provides no support. This case is the first time a

California court has held that a losing bidder may sue a winning bidder for interference

with prospective economic advantage merely on the basis of allegations the defendant

engaged in wrongful acts to obtain a public works contract. Like every case of first

impression, there is no precedent directly on point. But the case law that developed the

elements of this tort does not support the majority’s theory. I turn now to the other

authorities that have some pertinence, and find they lend support to my conclusion that,

in the context of public contracting, there can be no economic relationship between a

bidder and the public entity seeking bids.

In Blank v. Kirwan (1985) 39 Cal.3d 311, the plaintiff and one of the defendants

both applied for a poker club license in the City of Bell. The city council approved

defendant’s application, and denied plaintiff’s application. Plaintiff sued, alleging a

conspiracy among various private individuals and city officials to legalize and

monopolize the operation of poker clubs. The plaintiff alleged that “but for defendants’

acts he would have made some undetermined profit operating a poker club in the City of

Bell,” and argued these allegations stated a cause of action for intentional interference

with prospective economic advantage. (Id. at pp. 329-330.)

The Supreme Court held the plaintiff’s complaint did not state a cause of action

“because the first element of the tort is lacking.” (Blank v. Kirwan, supra, 39 Cal.3d at

p. 330.) “First, ‘[the] relationship between [plaintiff] and the City cannot be

characterized as an economic relationship. It was [plaintiff’s] relationship to a class of as

yet unknown [patrons] which was the prospective business relationship.’ [Citation.]”

(Ibid.) Even if the relationship between the plaintiff and the city could be characterized

as an economic relationship, the court said, “it would make little difference. The tort has

traditionally protected the expectancies involved in ordinary commercial dealings – not

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the ‘expectancies,’ whatever they may be, involved in the governmental licensing

process.” (Id. at p. 330.) Further, the city council’s discretion to grant or deny a poker

club license application was “so broad as to negate the existence of the requisite

‘expectancy’ as a matter of law. Thus, ‘no facts are alleged . . . showing that the plaintiff

had any reasonable expectation of economic advantage which would otherwise have

accrued to him . . . .’ [Citation.]” (Ibid.)

Cases in other jurisdictions have held that a bidder on a public contract has no

valid business expectancy for purposes of a tortious interference claim.

In Cedroni Associates, Inc. v. Tomblinson, Harburn Associates, Architects &

Planners, Inc. (2012) 492 Mich. 40 (Cedroni Associates), the Michigan Supreme Court,

in a summary disposition case, held that the disappointed lowest bidder on a public

contract does not have a valid business expectancy for the purpose of sustaining a claim

of tortious interference with a business expectancy. (Id. at p. 43.) In Cedroni Associates,

a school district, on the advice of the defendant firm that was assisting the district with

the bid selection process, awarded a project to a contractor who submitted the second

lowest bid. The lowest bidder sued the defendant for tortious interference with a business

expectancy.

The court held the plaintiff had no reasonable expectation of being awarded the

contract. (Cedroni Associates, supra, 492 Mich. at p. 45.) Under Michigan law, the

court explained, the lowest bidder on a public contract cannot bring a cause of action

against the municipality when its bid is rejected, even when the municipality is required

to accept the lowest responsible bidder. (Id. at p. 46.) Given that rule, the court said, “it

is difficult to fathom how plaintiff’s submission of the lowest bid could have created a

valid business expectancy in light of the highly discretionary process of awarding

governmental contracts. In terms of whether a valid business expectancy is created, a

plaintiff's expectations are entirely the same regardless of whether it alleges that the

government has wrongfully denied it the contract or, as here, that a third party has

interfered and caused a denial of the contract.” (Id. at pp. 46-47, italics and boldface

added.) The court further observed that, by statute, the public entity could reject any or

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all bids, and “ ‘when the ultimate decision to enter into a business relationship is, by

statute, a highly discretionary decision, a plaintiff cannot establish that its “business

expectancy” [reflected] a reasonable likelihood or possibility and not merely wishful

thinking.’ [Citation.]” (Id. at p. 47.)

In light of these principles, “a bidder on a school construction project should know

that its submission of the lowest bid does not create a reasonable probability that the

school district will award it the contract.” (Cedroni Associates, supra, 492 Mich. at

p. 47.)

Other states have reached similar conclusions.

In Powercorp Alaska, LLC v. Alaska Energy Authority (Alaska 2012) 290 P.3d

1173 (Powercorp), the plaintiff and one of the defendants both developed and

manufactured “switchgear” systems used to improve the operation of power-generation

facilities, and both companies “have tried to secure and sometimes have secured,

contracts with the [public agency] to install switchgear . . . .” (Id. at p. 1176.) A key

component of these systems was a “controller,” and the two companies used different

technologies for this key component. (Ibid.) The facts of the case are complex and were

disputed, but the plaintiff eventually sued the public agency that awarded the contract to

its competitor, as well as one of the agency’s employees, the competitor, and others. (Id.

at p. 1180.)

The plaintiff alleged, against the agency’s employee, a claim for intentional

interference with prospective economic advantage and misappropriation of a trade secret.

(Powercorp, supra, 290 P.3d at p. 1181.) Powercorp upheld the trial court’s dismissal of

the intentional interference claim, saying this: “[The plaintiff’s] intentional interference

claim is premised on the notion that [the plaintiff] has an existing prospective business

relationship with the [agency], but it has not met this threshold requirement. Procurement

laws entitle [the plaintiff] to a fair bidding process in which no particular contractor is

favored from the outset. Submitting a bid entitles the bidder to ‘fair and honest

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consideration.’ Submitting a bid does not provide any one bidder with a contract

expectancy superior to the rights of other bidders.”1 (Id. at pp. 1186-1187, fn. omitted.)

In Duty Free Americas, Inc. v. The Estée Lauder Companies, Inc. (S.D. Fla. 2013)

946 F.Supp.2d 1321 (Duty Free), the plaintiff was an operator of duty-free stores in

airports, and sued one of its former suppliers for intentional interference with the

plaintiff’s bids to obtain additional airport retail outlets. The court, applying Florida law,

dismissed the complaint because it “fail[ed] to plausibly allege that a business

relationship existed between it and the Newark, Boston, and Orlando airports . . . .” The

court dismissed the complaint without prejudice, but observed that “it seems unlikely [the

plaintiff] will be able to sufficiently plead the existence of a protected business

relationship . . . .” (Id. at p. 1338.)

The court explained that “a bidder generally cannot establish a protected business

relationship with an entity soliciting bids through a competitive bidding process,”

because a solicitation for bids is “merely a request for offers from interested parties,” and

because “a solicitation for bids encourages parties besides a plaintiff bidder to submit

offers in response,” so “the bidding process itself cannot serve as evidence that the

solicitor probably would have entered into a contract with the plaintiff but for the

defendant’s interference.” (Duty Free, supra, 946 F.Supp.2d at pp. 1338-1339.)

Consequently, “to establish a protected business relationship within a bidding process, a

plaintiff must allege additional facts indicating that the relationship went beyond the

bidding process and into negotiations which in all probability would have been

1 The court went on to say that the plaintiff did not submit a bid. The plaintiff chose

not to do so because it understood the request for proposals to require using a key

component (the controller) other than its own, and it had no intention of building systems

using other controllers, so chose not to bid. The court then concluded: “[The plaintiff]

has not shown that but for [the employee’s] interference, it expected to enter a contract

with the [agency] from which it would derive economic benefits.” (Powercorp, supra,

290 P.3d at p. 1187.) This conclusion, it seems to me, refers to the fifth element of the

tort, proximate causation (Korea Supply, supra, 29 Cal.4th at p. 1165), and in no way

undermines Powercorp’s previously stated holding that submitting a bid does not provide

any bidder with the threshold requirement of “an existing prospective business

relationship.” (Powercorp, at pp. 1186-1187.)

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completed.” (Id. at p. 1339.) The court went on to describe additional reasons for

finding no protectable relationship, including that there was no allegation the airports had

to accept the lowest bid for duty-free concessions, but concluded by reiterating that

“participating in this competitive bidding process does not establish a protected business

relationship.” (Ibid.)

The majority cites various points to distinguish these cases, and of course there are

distinctions. But I do not think those distinctions make a difference, or detract from the

fundamental threshold point each case makes. Notably, plaintiffs do not even attempt to

distinguish these cases. Instead, plaintiffs merely say, without citation, that “cases . . .

referring to ‘disappointed bidders’ are factually inapposite” because they do not contain

allegations of “ ‘independently wrongful conduct’ ” by the defendant toward the

plaintiffs. This assertion illustrates in sharp relief a fundamental misunderstanding of the

elements of an intentional interference claim.

California does indeed require, unlike other jurisdictions, independently wrongful

conduct. But, as I noted above, that requirement is part of the third necessary element of

the tort: intentionally wrongful acts designed to disrupt the plaintiff’s relationship. The

Supreme Court made plain in Korea Supply this requirement is part of the third element

of the tort.2 That has nothing to do with the need to plead and prove the first element of

the tort: an economic relationship with probable economic benefit that necessarily must

pre-exist the defendant’s wrongful conduct interfering with it.

That the economic relationship containing the probability of future benefit must

precede, or exist separately from, the defendant’s interference seems obvious, and is

apparent in the cases. In Korea Supply, the plaintiff had an agency relationship with a

2 “[Lockheed Martin] contends that to satisfy the tort’s third element -- intentional

wrongful acts designed to disrupt the plaintiff’s relationship with its benefactor -- a

plaintiff must allege that the defendant purposely sought the disruption. It asserts that the

inclusion of the word ‘designed’ in the typical formulation of the third element is

evidence that a plaintiff is required to plead specific intent. We disagree. . . . [¶]

Contrary to Lockheed Martin’s assertion, the inclusion of the word ‘designed’ in the third

element of the tort does not necessarily mean that this tort contains a specific intent

requirement.” (Korea Supply, supra, 29 Cal.4th at p. 1155.)

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bidder that would have given him a $30 million commission if the bidder had won the

contract. (29 Cal.4th at p. 1164.) That economic relationship existed entirely apart from

and before the defendant’s illegal conduct that disrupted that relationship. The same is

true in Buckaloo v. Johnson (1975) 14 Cal.3d 815, 827, where a real estate broker, in

response to a seller’s open listing of her property with the intention that responding

brokers would be paid a commission, procured a buyer who, with knowledge of the

promised commission, induced the seller to make a sale agreement leaving the broker

uncompensated. (Id. at p. 829.) The broker’s “expectancy” existed without regard to the

defendant’s subsequent conduct.

Again, and always, the plaintiff’s “expectancy” must necessarily precede the

interfering conduct. Sole Energy Company v. Petrominerals Corporation (2005) 128

Cal.App.4th 212, 243, makes this plain. (That case did not involve bidding on a public

contract.) In that case, the plaintiffs contended one of the defendants (Silverman)

tortiously interfered in a transaction by which one corporation was to acquire the stock

and assets of another (HBOC). (Id. at pp. 241, 243.) The court found the plaintiffs failed

to produce evidence Silverman interfered with an existing economic relationship.

Silverman made misrepresentations about another defendant’s (Petrominerals) inability to

purchase and lack of interest in acquiring HBOC. (Id. at pp. 218, 243.) But Silverman’s

allegedly wrongful conduct occurred before the plaintiffs’ economic relationship with the

third party (HBOC and others) arose: “As of [the date of Silverman’s

misrepresentations], none of the Plaintiffs in this case had an existing economic

relationship with HBOC [and the others], much less an existing relationship containing

the probability of a future economic benefit. Discussions about the possibility of

purchasing HBOC’s stock had just begun in earnest. The letter of intent – which

Plaintiffs contend was the basis for their interference with economic relationship cause of

action – would not be written until three months later.” (Id. at p. 243.) The court also

found the misrepresentations were made to induce the plaintiffs into seeking an economic

relationship with HBOC and the others, not to disrupt it. (Ibid.)

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Thus it is plain that the “economic relationship . . . that contains the probability of

future economic benefit to the plaintiffs” is a threshold element, and cannot depend for its

existence on whether or not defendant acts wrongfully. The threshold question to ask is,

did plaintiffs have an existing economic relationship with the public entity soliciting bids

for a public project containing the probability of future economic benefit? – without

regard to defendant’s allegedly illegal conduct. In other words, plaintiffs must have a

prospective economic advantage or expectancy with which a defendant might then

interfere or disrupt. But no such expectancy exists among bidders for a public works

contract.

Westside Center Associates v. Safeway Stores 23, Inc. (1996) 42 Cal.App.4th 507

put the point very well: “These two decisions, Blank [v. Kirwan, supra] and Youst [v.

Longo (1987) 43 Cal.3d 64], support the view that the interference tort applies to

interference with existing noncontractual relations which hold the promise of future

economic advantage. In other words, it protects the expectation that the relationship

eventually will yield the desired benefit, not necessarily the more speculative expectation

that a potentially beneficial relationship will eventually arise.” (Id. at p. 524.) Westside

Center examined many cases in connection with the claim before it, which was that

liability could be imposed for interfering with prospective relationships with “as yet

unidentified” third parties. (Id. at p. 520.) Examining various cases, the court agreed

with the view that “a defendant’s tortious conduct must have interfered with a specific

existing relationship, not simply with the formation of one in the future” (id. at p. 525),

and found that view gained additional support from the usual formulation of the elements

of the tort itself: “These requirements presuppose the relationship existed at the time of

the defendant’s allegedly tortious acts lest liability be imposed for actually and

intentionally disrupting a relationship which has yet to arise.” (Id. at p. 526.)

In short, plaintiffs, and the majority, have conflated two different elements of the

tort. Plaintiffs allege an existing relationship arose with the public entity, containing a

probability of future economic benefit, solely by virtue of having submitted a bid. And

the majority holds that the second lowest bidder, who would otherwise have been

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awarded the contract, can state a cause of action against the winning bidder if the winning

bidder obtained lowest bidder status only by illegally paying its workers less than the

prevailing wage. Both these theories effectively rewrite the first element of the cause of

action for interference with prospective economic advantage – “an economic relationship

with a probable future economic benefit” – by wiping out the predicate “relationship”

language.

Under plaintiffs’ theory, anyone who submits a bid has a legitimate expectation of

winning the contract – an expectation that arose at the moment of submitting a bid, even

though it cannot be determined until after all the bids have been unsealed which bidder is

the second lowest bidder. And under the majority’s theory, the second lowest bidder has

that legitimate expectation, if it turns out that the winning bidder engaged in illegal

conduct. Both these theories would create a new tort for the benefit of parties who had

no relationship with the public entity whatever before submitting a bid. This is a

departure without logical reason from all the cases limiting the tort to “ ‘interference with

an existing contract or a contract which is certain to be consummated.’ ” (Buckaloo,

supra, 14 Cal.3d at p. 823, fn. 6; see id. at pp. 826-827.)

The only reason plaintiffs offer for reinventing the tort of interference with

prospective economic advantage was the assertion in oral argument that “the best way to

prevent wage theft” is to expand the tort as plaintiffs propose. And the majority likewise

maintains that sound policy reasons, and particularly the prevailing wage law, support its

conclusion. But the tort of interference with prospective economic advantage was not

developed to prevent wage theft; it was developed to protect relationships that give rise to

expectancies in commercial dealings, not the “expectancies,” whatever they may be, of a

bidder for a public contract. (See Blank v. Kirwan, supra, 39 Cal.3d at p. 330.)

Moreover, the public works process is not intended to prevent wage theft. It is

intended to provide infrastructure and projects for public benefit, at the lowest cost to the

public. Public works projects are intended to benefit the public, not bidders. (Swinerton

& Walberg Co. v. City of Inglewood-L.A. County Civic Center Authority (1974) 40

Cal.App.3d 98, 101 [lowest bidder on public works contract has no tort cause of action

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against public entity for awarding contract to second lowest bidder because competitive

bidding requirements were imposed solely for the benefit and protection of the public

rather than for the benefit of the bidders]; Charles L. Harney, Inc. v. Durkee (1951) 107

Cal.App.2d 570, 580 [“competitive bidding statutes are not passed for the benefit of

bidders but for the benefit and protection of the public”]; see Kajima/Ray Wilson v. Los

Angeles County Metropolitan Transportation Authority (2000) 23 Cal.4th 305, 308, 317

(Kajima) [low bidder may recover bid preparation costs from public agency for wrongful

denial of contract under promissory estoppel theory, but not lost profits; “competitive

bidding statutes are ‘ “enacted for the benefit of property holders and taxpayers, and not

for the benefit or enrichment of bidders” ’ ”; allowing award of lost profits would not

benefit the general public].)

Although the majority says this expansion of the tort will permit the second lowest

bidder to sue the winning bidder who won the award by engaging in illegal conduct, there

is no reason why the newly expanded tort will not provide a cause of action to every

bidder that alleges all the lower bidders engaged in wage theft, or predatory pricing, or

bribery, or provided sexual or other favors, or engaged in any other kind of illegal

conduct. Imposing a duty upon each bidder owed to competing bidders giving rise to an

actionable claim of interference with prospective economic advantage would disrupt,

increase the cost, and delay the completion of public works. (See generally Kajima,

supra, 23 Cal.4th at p. 317 [the possibility of recovering lost profits against public agency

alone may encourage frivolous litigation and further expend public resources; “prudence

is warranted whenever courts fashion damages remedies in an area of law governed by an

extensive statutory scheme”].)

For these reasons, I cannot agree with the majority that plaintiffs have stated a

claim for intentional interference with prospective economic advantage. I would affirm

the trial court’s judgment.

GRIMES, J.

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