Vista West, Inc. v. North American Philips Corp., 875 F.2d 319 (9th Cir. 1988)Annotate this Case
Vista West, Inc., a California Corporation, Plaintiff-Counterdefendant-Appellant, v. North American Philips Corp., Defendant-Counterclaimant-Appellee, and Richard "Dick" Kress, et al., Defendants-Appellees.
United States Court of Appeals, Ninth Circuit.
Argued and Submitted May 11, 1989.Decided May 15, 1989.
As Amended on Denial of Rehearing June 21, 1989.
Before BROWNING, ALARCON, and ALAN E. NORRIS, Circuit Judges.
Plaintiff-appellant Vista West, Inc. (Vista) appeals from the order of the district court granting summary judgment in favor of defendants-appellees North American Philips Corp. (NAPC), et al. This is a diversity action in which the substantive law of California applies. We affirm in part and reverse in part.
Since Vista is appealing from a grant of summary judgment against it, we present this brief summary of the evidence in the light most favorable to it. Coverdell v. Department of Social and Health Serv., 834 F.2d 758, 761-62 (9th Cir. 1987). In 1962, Vista's founder James Butler began distributing products manufactured by NAPC. Relations between Butler and NAPC were governed by a series of written contracts which provided, inter alia, that the distributorship was terminable at will by either party upon 30 days notice. NAPC representatives told Butler to disregard the "at will" provisions in these contracts. Butler was told that NAPC would terminate the distributorship only upon good cause. Thereafter, Butler formed Vista. Several individuals joined Vista in reliance on NAPC's repeated assurances that the "at will" provisions in the various contracts were inapplicable.
In 1979, NAPC began a practice which Vista refers to as "stuffing." According to Vista, "NAPC created records of fictitious sales to customers before any actual sale had taken place and then used those phoney 'sales' to bolster its accounting records." NAPC arranged with certain customers to allow goods to be shipped in their name to Vista's warehouse with the understanding that the customer had no responsibility for the goods. These goods were counted as sales on NAPC's books immediately upon delivery to the warehouse. Vista was required to find customers to "actually" purchase the goods. Vista representatives objected to this practice claiming that it was illegal. NAPC representatives advised Vista representatives to keep quiet about stuffing, and that Vista's distributorship would be in jeopardy if they refused to participate in stuffing.
NAPC and Vista signed the final contract governing their relationship in 1981. This contract specifically provided " [t]his agreement may be terminated by either party at any time, with or without cause, upon thirty days written notice." Thereafter, Vista reorganized, bringing in younger personnel to replace those approaching retirement age.
In the summer of 1982, Vista director Karl Lepple secretly contacted NAPC and disclosed proprietary information about Vista's projected income and budget. NAPC representative Robert Savre relied on this information in recommending that Vista's distributorship be terminated. In May 1983, Lepple sent a secret letter to NAPC in which he criticized Vista's performance and recommended that the California market be split in two. Five weeks later, Lepple resigned from Vista and joined with defendant Dennis Long as a principle in defendant Pacific Merchandising, Inc.
In July, 1983, Vista director James Regitz sent a secret letter to NAPC in which he criticized Vista, suggested that the California market be split for distribution purposes, and solicited business for a new distribution company he intended to form with defendant William Pherrin. Thereafter, Regitz and Pherrin met with NAPC officials and discussed the proposals made in the letter.
On February 15, 1984, NAPC terminated Vista's distributorship pursuant to the termination clause in the 1981 contract. On February 21, 1984, NAPC named Lepple and Long's Pacific Merchandising, Inc. as its distributor for Northern California, and Regitz and Pherrin's organization as NAPC's distributor for Southern California.
In April 1984, Vista filed an action in a California state court against NAPC, several NAPC employees (Richard Kress, Patrick Dinley, Robert Savre, Marty McNalley and Howard Stolte--hereinafter also referred to collectively as NAPC), and against Lepple, Long, Pacific Merchandising, Inc., Regitz, and Pherrin (hereinafter collectively referred to as the "non-NAPC defendants"). In May 1984, NAPC removed this action to federal court.
In its complaint, Vista asserted causes of action against NAPC for breach of contract, breach of the implied covenant of good faith and fair dealing, unfair competition, and civil conspiracy. Against the non-NAPC defendants, Vista alleged claims for intentional interference with contractual relations, intentional interference with prospective economic advantage, breach of fiduciary duty, and civil conspiracy. NAPC filed counterclaims against Vista alleging that Vista owed NAPC for the proceeds of the sale of certain NAPC products and goods in Vista's possession.
Each of the defendants filed a motion for summary judgment. The district court granted these motions in favor of the defendants on each of Vista's claims. The district court also held that Vista was barred from asserting its claims for breach of the implied covenant of good faith and fair dealing and unfair competition as an offset of NAPC's counterclaims. Thereafter, the parties entered into a stipulation for judgment on NAPC's counterclaims, subject to reversal depending on this court's determination of Vista's appeal.
The district court granted summary judgment against Vista on all of its claims against all defendants. "A grant of summary judgment is reviewed de novo." Coverdell, 834 F.2d at 761. "We must determine, viewing the evidence in the light most favorable to the nonmoving party, whether there are any genuine issues of material fact and whether the district court correctly applied the relevant substantive law." Id. at 761-62.
Vista contends the 1981 agreement was not "integrated," i.e., that it was not "intended ... to serve as the exclusive embodiment of ... [the Vista and NAPC] agreement." Masterson v. Sine, 68 Cal. 2d 222, 225, 436 P.2d 561, 563, 65 Cal. Rptr. 545, 547 (1968). Vista contends the parties made a collateral oral agreement prior to signing the 1981 contract which provided that NAPC would terminate the distributorship only upon good cause. Vista seeks a remand so it might prove the existence of this separate agreement by parol evidence.
The district court did not address this contention because it was not asserted. Because this claim was not raised in the district court, we need not consider it. See e.g., International Union of Bricklayers & Allied Craftsman Local Union No. 20 v. Martin Jaska, Inc., 752 F.2d 1401, 1404 (9th Cir. 1985) (" [w]e will not ... review an issue not raised below unless necessary to prevent manifest injustice"); Michael-Regan Co., Inc. v. Lindell, 527 F.2d 653, 659 (9th Cir. 1975) (" [e]rrors not raised below will ordinarily not be considered on appeal").
Moreover, the parol evidence which Vista relies upon to prove the existence of a collateral "good cause" agreement flatly contradicts the express terms of the written agreement. The 1981 contract provides, in part, " [t]his agreement may be terminated by either party at any time, with or without cause, upon thirty days written notice." (Emphasis added). Since the alleged parol evidence is inconsistent with the written agreement, it would have been inadmissible under California's parol evidence rule. See e.g., Gerdlund v. Electronic Dispensers Int'l, 190 Cal. App. 3d 263, 272, 235 Cal. Rptr. 279, 283 (1987) (where "the alleged oral agreement is completely inconsistent with the language of the written contract ... the proffered parol understanding as to grounds for termination would be inadmissible to vary the contractual terms even if the contract were not an integration") (emphasis in original); American Nat. Ins. Co. v. Continental Parking Corp., 42 Cal. App. 3d 260, 266, 116 Cal. Rptr. 801, 805 (1974).
Vista also asserts that the 1981 agreement providing for "no good cause" termination was subsequently orally modified by the parties to provide for termination of the distributorship only upon "good cause." Vista contends the oral modification is enforceable because it was supported by new consideration. Cal.Civ.Code Sec. 1698(c) (West 1987) ("a contract in writing may be modified by an oral agreement supported by new consideration"). Vista asserts that it:
gave new consideration to NAPC in a least two ways. First, Vista ... undertook several major internal reorganizations, bringing in younger personnel to replace the older executives who were nearing retirement, and submitted the reorganization plans and the names of proposed new employees to NAPC for advance approval....
Vista ... also gave new consideration to NAPC by not terminating the contract with NAPC, as it had a right to do on 30 days' notice....
Vista did not argue that the reorganization and its forbearance in not canceling the agreement constituted consideration for modification of the written agreement when it opposed NAPC's summary judgment motion on this issue in the district court. Accordingly, the district court did not address the question whether reorganization and forbearance constituted new consideration. Since Vista did not rely on these facts in opposing summary judgment in the court below, we decline to consider them in determining whether the alleged modification was supported by consideration. See Von Brimer v. Whirlpool Corp., 536 F.2d 838, 848 (9th Cir. 1976) ("most of the questions which appellants denominate as 'triable issues of fact' were not presented to the court below, and, as a general rule, this precludes appellate review"); International Union of Bricklayers, 752 F.2d at 1404.
Vista has failed to present any evidence tending to establish that NAPC bargained for the reorganization and forbearance. See 1 B. Witkin, Summary of California Law Sec. 209 (9th ed. 1987) (to constitute consideration, " [t]he act or forbearance must be something bargained for in exchange for the offeror's promise, i.e., it is immaterial what detriment the offeree suffered or what benefits he may have conferred on the offeror, unless the offeror agreed to be bound in return"); Homestead Supplies, Inc. v. Executive Life Ins. Co., 81 Cal. App. 3d 978, 985-86, 147 Cal. Rptr. 22, 25-26 (1978); Wine Packing Corp. v. Voss, 37 Cal. App. 2d 528, 538, 100 P.2d 325, 330 (1940). Evidence that NAPC encouraged and approved of the reorganization does not demonstrate that it agreed in exchange to be bound by the alleged "good cause" modification.
Vista had an obligation under the 1981 written contract to "use its best efforts to promote the sale" of NAPC products. Reorganization enabled it to carry out its part of the bargain. " [D]oing or promising to do what one is already bound to do cannot be consideration for a promise." 1 B. Witkin, supra, at Sec. 221; see also Williams Const. Co. v. Standard Pacific Corp., 254 Cal. App. 2d 442, 453, 61 Cal. Rptr. 912, 919 (1967).
Vista argues that the district court erred in granting summary judgment against it on its claim that NAPC is estopped from denying that the modification is unenforceable for lack of consideration. The district court granted summary judgment to NAPC on this claim based on its reading of Munoz v. Kaiser Steel Corp., 156 Cal. App. 3d 965, 203 Cal. Rptr. 345 (1984). According to the district court, " [e]stoppel arises only when unjust enrichment of defendant or unconscionable injury to plaintiff would otherwise result. Munoz v. Kaiser Steel Corp., 156 Cal. App. 3d 965 (1984). [Vista] ... has not offered facts to support ... a finding [of either unjust enrichment or unconscionable injury]."
Vista does not dispute the district court's conclusion that Vista failed to present sufficient facts to support a finding of unjust enrichment or unconscionable injury. Instead, Vista contends that the district court erred in relying upon Munoz, because that case "dealt with estoppel to plead the statute of frauds, a doctrine different from equitable estoppel." (Emphasis in original). Before this court, Vista asserts that equitable estoppel is the doctrine applicable to its claim that NAPC cannot deny the enforceability of the modification. Vista argues that equitable estoppel does not require a showing of unjust enrichment or unconscionable injury.
In opposing NAPC's summary judgment motion on this issue in the district court, however, Vista cited Munoz as providing the relevant estoppel doctrine. Vista argued in the district court that it suffered "an unconscionable injury" in reliance upon the alleged modification. Thus, any error committed by the district court in applying Munoz was invited by Vista. Therefore, Vista cannot be heard to complain about the error. See e.g., Glassman Const. Co., Inc. v. United States, 421 F.2d 212, 215 (4th Cir. 1970) (an appellant "is precluded from complaining of errors invited by it"); Hampson v. Bucyrus-Erie Co., 464 F.2d 562, 563 (3d Cir. 1972) (same).
Moreover, "the existence of estoppel is a question of fact...." Pacific Gas & Elect. Co. v. Hacienda Mobile Home Park, 45 Cal. App. 3d 519, 531, 119 Cal. Rptr. 559, 567 (1975). To defeat NAPC's motion, Vista was required to present evidence sufficient to support a finding that it detrimentally relied upon the alleged modification. See 1 B. Witkin, supra, at Sec. 249(b) (" [e]ven though a promise is made, there is no promissory estoppel unless there is reliance and substantial detriment"); Blatt v. University of So. California, 5 Cal. App. 3d 935, 943, 85 Cal. Rptr. 601, 606 (1970) (same); see also Coverdell, 834 F.2d at 769 (" [i]f the nonmoving fails to make a showing sufficient to establish that there is a genuine issue of fact ... then summary judgment is appropriate"). Vista failed to present such evidence. While Vista presented evidence that it detrimentally relied on the alleged promises made by NAPC prior to the 1981 contract that termination would be only upon "good cause," Vista presented no evidence that it detrimentally relied on NAPC's alleged promise to modify the 1981 contract.
Vista argues that the district court erred in awarding summary judgment to NAPC on Vista's cause of action based on an alleged breach of the implied covenant of good faith and fair dealing. The district court held that California law does not imply a good cause provision into ordinary commercial contracts. The court also rejected Vista's related claim against NAPC for wrongful termination against public policy, holding that such a cause of action exists only when there is an employer-employee relationship. Order at 5, citing Tameny v. Atlantic Richfield, 27 Cal. 3d 167 (1980). Since the entry of summary judgment on these claims, the California Supreme Court has acted to clarify this area of the law. Foley v. Interactive Data Corp., 47 Cal. 3d 654 (1988). Accordingly, we consider, in light of Foley, whether summary judgment was appropriate on both or either of these claims.
We turn first to Vista's contract claim based on the implied covenant of good faith and fair dealing.1 Vista's complaint alleges that each of the written agreements "had an implied covenant of good faith and fair dealing." "As a result of that covenant ... NAPC ... had a duty to do nothing which would deprive Plaintiff of the benefits of their agreement" without justification or legal cause. NAPC violated the implied covenant of good faith and fair dealing when it terminated the agreement, Vista claims, because the motivating factor behind NAPC's decision was Vista's objection to NAPC's accounting practices, which Vista contends are illegal. Vista argues that the California Supreme Court's decision in Foley fully supports its contract claim for breach of the covenant.
Contrary to Vista's assertion, we believe Foley precludes Vista from bringing a cause of action based on this theory. In Foley the court considered at length the development of the doctrine of the implied covenant of good faith and fair dealing--both its purpose and its limits. The court agreed that " [e]very contract imposes upon each party a duty of good faith and fair dealing in its performance and its enforcement." 47 Cal. 3d at 683 (quoting Rest.2d Contracts, Sec. 205). The court made clear, however, that the implied covenant of good faith and fair dealing cannot be invoked to contradict another express covenant of the contract. The court explained, " [t]he covenant of good faith is read into contracts in order to protect the express covenants or promises of the contract, not to protect some general public policy interest not directly tied to the contract's purposes." Id. at 690. The court rejected the idea that an employee could invoke the implied covenant of good faith to prevent an employer from terminating an at-will contract:
[W]ith regard to an at-will employment relationship, breach of the implied covenant cannot logically be based on a claim that a discharge was made without good cause. If such an interpretation applied, then all at-will contracts would be transmuted into contracts requiring good cause for termination.... Because the implied covenant protects only the parties' right to receive the benefit of their agreement, and, in an at-will relationship there is no agreement to terminate only for good cause, the implied covenant standing alone cannot be read to impose such a duty.
Id. at 698 n. 39.
Thus, Foley explicitly endorses the rule that when parties to a written contract have agreed that the contract is terminable at the will of either party, as is true here, the implied covenant of good faith and fair dealing cannot be invoked by either party to prevent a court from enforcing the express terms of the contract. See also Witt v. Union Oil Co., 99 Cal. App. 3d 435, 441 (1979) (party cannot invoke implied covenant of good faith and fair dealing to "override an express covenant" of the agreement); 1 B. Witkin, Summary of California Law (8th ed. 1973) Contracts, Sec. 580, p. 497) ("a covenant will not be implied against express terms"). Any other result would allow one party to invoke the covenant to frustrate, rather than to give effect to, the reasonable expectations of the parties as recorded in a valid written contract.
Accordingly, we hold that the district court properly awarded summary judgment to NAPC on Vista's contract claim for breach of the implied covenant of good faith and fair dealing.B.
We turn then to Vista's related tort claim against NAPC for terminating the contract in violation of public policy.2 Vista claims that the contract was terminated by NAPC because Vista complained about certain accounting practices of NAPC, including "stuffing" and "cooking the books." Claiming that these accounting practices are illegal under both California and federal securities laws, Vista contends that public policy considerations prevent NAPC from terminating the contract in retaliation against Vista for its complaints. Vista compares NAPC's conduct in terminating the contract to that of the employer who discharges an employee for blowing the whistle on the employer or for refusing to participate in the employer's illegal activities.
It is true that California courts have long recognized that an employer may not discharge an at-will employee when discharge would be contrary to public policy. Petermann v. International Brotherhood of Teamsters, 174 Cal. App. 2d 184 (1959) (employee refused to commit perjury); Tameny, 27 Cal. 3d at 178 (employer required employee to participate in unlawful conduct); Hentzel v. Singer Co., 138 Cal. App. 3d 290 (1982) (employee disclosed hazardous working conditions). In Premier Wine & Spirits v. E. & J. Gallo Winery, 846 F.2d 537 (9th Cir. 1988), we considered whether California would extend this cause of action beyond the employer-employee relation. We decided that California would not, holding:
Although the principle of Tameny is logically capable of extension beyond the employment relation, there is a consideration that makes it peculiarly apt in that setting and not in a broader context: it is normal for an employee to take directions from his employer. In the ordinary commercial world, the control of one party's actions by another is not so usual or so close. It is hard to forecast that California would extend the principles of Tameny to [commercial contracts].
Id. at 540.
Our review of California law uncovers no appellate court that has been willing to extend the tort of wrongful discharge in violation of public policy to terminations of ordinary commercial agreements. Indeed, one court of appeal declined even to extend the tort to independent contractor agreements. In Abrahamson v. NME Hospitals, Inc., 195 Cal. App. 3d 1325 (1987), the court held that a doctor who had an terminable at-will independent contractor agreement with a hospital had no cause of action against the hospital for allegedly terminating the contract so as to prevent the doctor from reporting the hospital's inadequate health care. The court held that the cause of action could only be asserted by employees against their employers. Id. at 1329. See also Witt, 99 Cal. App. 3d at 440 (motive of franchisor in refusing to renew lease irrelevant when no provision in lease required renewal and franchisee had no reasonable expectation of renewal); cf. Bert G. Gianelli Distributing Co. v. Beck & Co., 172 Cal. App. 3d 1020, 1035-36 (1985) (court refused to imply good cause termination requirement into distributorship agreement because no unequal bargaining power or element of reliance).
Nor does Foley in any way suggest that the California Supreme Court would extend the cause of action to the commercial context. Foley simply did not address the issue whether it violates public policy for a party to an at-will commercial contract to terminate the contract because the other party objects to allegedly illegal business practices. Earlier decisions by the California Supreme Court also fail to support Vista's claim that the cause of action applies as well in the commercial context. See Tameny, 27 Cal. 3d at 172 (limited discussion to employer's ability to discharge employees when discharge violated public policy); Seaman's Direct Buying Service, Inc. v. Standard Oil Co., 36 Cal. 3d 752, 768-69 (1984) (court expressed reluctance about extending tort remedies for breach of contract to the context of the ordinary commercial contract). As we observed in Triangle Min. Co. v. Stauffer Chemical Co., 753 F.2d 734 (9th Cir. 1985), " [w]here there exists no special element of reliance or unequal bargaining power ... courts generally conclude that ' [w]hen the right to terminate a contract is absolute under the clear wording of the agreement the motive of the party in terminating such an agreement is irrelevant to the question of whether the termination is effective.' " Id. at 740 (quoting Augusta Medical Complex, Inc. v. Blue Cross, 227 Kan. 469 (1980).
In the absence of reason to believe that the California Supreme Court would decide the issue differently, we must follow the decisions of the state courts of appeal. E.g., Miller v. Fairchild Indus., Inc., 797 F.2d 727, 735 (9th Cir. 1986). In this case, the state courts of appeal in two decisions, Abrahamson and Witt, have declined to extend the cause of action beyond the employment context. We are bound by those decisions.
Finally, we reject Vista's claim that it has stated a valid cause of action under Foley for breach of an implied-in-fact covenant not to terminate without cause. Foley does not disturb in any way California's parole evidence rule, its requirement that oral modifications to a written contract be supported by new consideration, or decisions by the courts of appeal that an implied-in-fact covenant cannot be invoked to contradict an express covenant. See discussion supra at 6-8; Foley, 47 Cal. 3d at 680 n. 23.
Vista contends that the district court erred in ordering summary judgment against it on its claim for damages against NAPC brought under Cal.Bus. & Prof.Code Secs. 17200 (West 1987). The district court granted summary judgment for NAPC because it found that Vista had "not come forward with either a legal or factual basis for recovery of damages on this claim."
In support of its claim of error, Vista cites the decision of the California Court of Appeal in United Farm Workers of America v. Superior Court, 47 Cal. App. 3d 334, 344, 120 Cal. Rptr. 904, 911 (1975), which held that damages are recoverable for violations of section 17200. However, in Chern v. Bank of America, 15 Cal. 3d 866, 875, 544 P.2d 1310, 1315, 127 Cal. Rptr. 110, 115 (1976), the California Supreme Court held that damages are not available under a statute related to section 17200. See Committee on Children's Television, Inc. v. General Foods Corp., 35 Cal. 3d 197, 215 and n. 16, 673 P.2d 660, 671 and n. 16, 197 Cal. Rptr. 783, 794 and n. 16 (1983) (noting the conflict between the approaches of the courts in United Farm Workers and Chern). Inasmuch as we must "follow a state supreme court's interpretation of its own statute in the absence of extraordinary circumstances," Dimidowich v. Bell & Howell, 803 F.2d 1473, 1482 (9th Cir. 1986), modified, 810 F.2d 1517 (1987); accord Knapp v. Cardwell, 667 F.2d 1253, 1260 (9th Cir.), cert. denied, 459 U.S. 1055 (1982), the district court did not err in granting summary judgment on Vista's unfair competition claim.
Vista contends that the district court erred in granting summary judgment to NAPC and the non-NAPC defendants on Vista's causes of action for intentional interference with contractual relations and intentional interference with prospective economic advantage. While we affirm the district court's decision as to NAPC,3 we reverse that the district court's grant of summary judgment as to the non-NAPC defendants.
To establish a claim for intentional interference with contract and with prospective economic advantage, the plaintiff must demonstrate that the defendant's acts caused the contract to be terminated and economic relations to be severed. See Buckaloo v. Johnson, 14 Cal. 3d 815, 822 (1975). The district court awarded summary judgment to the defendants on the ground that Vista had not alleged in its complaint that the non-NAPC defendants caused, or "induced," NAPC to terminate the agreement. Order at 6. On appeal, the defendants' sole argument to support the district court's decision on these claims is that Vista has not alleged nor offered any evidence to prove that non-NAPC defendants induced NAPC to terminate the agreement.
We believe that the district court erred in granting summary judgment on the ground that Vista had not alleged or demonstrated inducement by the non-NAPC defendants. First, while inartfully pleaded, Vista's First Amended Complaint does in fact allege that the non-NAPC defendants induced NAPC to terminate its contract with Vista. See Vista's Sixth Cause of Action for Conspiracy to Induce Breach. Second, Vista produced sufficient evidence to raise a triable issue of fact whether Lepple and Regitz proximately caused NAPC's decision to terminate its agreement with Vista. The evidence submitted by Vista indicates that Lepple and Regitz, while officers and directors of Vista, met and communicated with NAPC, criticized Vista's performance under its contract with NAPC, and recommended that the California market be split up and given to new companies they intended to form. A reasonable juror could infer from this evidence and the undisputed events that followed--NAPC's terminating its contract with Vista and giving that business to companies formed by Regitz and Lepple--that Lepple and Regitz caused NAPC to end its business relationship with Vista.
It makes no difference that elsewhere in its complaint Vista alleged that there was an additional motivating factor behind NAPC's decision to terminate the contract. Vista complaint alleges two concurrent causes for NAPC's decision: 1) the inducements of the non-NAPC defendants and 2) Vista's unwillingness to participate in NAPC's stuffing activities. Under California law,
[w]here two causes combine to bring about an injury and either one of them operating alone would have been sufficient to cause the injury, either cause is considered to be a ... [proximate or legal] cause of the injury if it is a material element and a substantial factor in bringing it about, even though the result would have occurred without it.
John B. Gunn Law Corp. v. Maynard, 189 Cal. App. 3d 1565, 1571 (1987) (internal quotation omitted).
The district court also granted summary judgment to the non-NAPC defendants for Vista's claims for breach of fiduciary duty. The court held that " [t]he absence of causation also bars the breach of fiduciary duty claims against Regitz and Lepple." Order at 6. This holding was in error. Under California law a director or officer of a corporation is liable for breaching his duty of loyalty to the corporation, for depriving the corporation of an economic opportunity, and for doing anything to injure the corporation. Bancroft-Whitney Co. v. Glen, 64 Cal. 2d 327, 345-48 (1966). Viewed in the light most favorable to Vista, the evidence shows that Vista's officers Lepple and Regitz met in secret with NAPC officials, revealed confidential information about Vista, criticized Vista's performance under the contract with NAPC and actively attempted to obtain the NAPC contract for themselves and corporations they planned to form. On the basis of this evidence, a reasonable juror could conclude that Lepple and Regitz had breached their fiduciary duty to Vista.
The district court also granted summary judgment to NAPC and all the non-NAPC defendants on Vista's civil conspiracy claim. Under California law, if a party to a contract conspires together with third parties to deprive the other party to the contract of the benefits of that contract, the injured party has a cause of action for civil conspiracy against the third parties, as well as against the other contracting party. Manor Inv. Co., Inc. v. F. W. Woolworth Co., 159 Cal. App. 3d 586, 594 (1984). The district court granted summary judgment on the civil conspiracy claims on the ground that Vista's underlying claims against the non-NAPC defendants for interference with contractual relations and prospective business advantage failed. As explained above, however, Vista has presented sufficient evidence to survive summary judgment on its underlying claims against the non-NAPC defendants. Thus, summary judgment should not have been granted because of insufficient evidence to support the underlying civil wrong.
Viewed in the light most favorable to Vista, the evidence of a conspiracy between NAPC and the non-NAPC defendants is sufficient to withstand a motion for summary judgment. The evidence shows that NAPC officials met with non-NAPC officials on several occasions, during which non-NAPC officials criticized Vista's performance under the contract and suggested that the market be split up and given to companies headed by Leggle and Regitz. Based on this evidence and the fact that NAPC subsequently terminated its agreement with Vista, a reasonable juror could infer that NAPC had conspired together with the non-NAPC defendants to intentionally interfere with Vista's contractual relations and prospective economic advantage.
The judgment of the district court is reversed as to Vista's claim of civil conspiracy against NAPC and Vista's claims of intentional interference with contractual relations, intentional interference with prospective economic advantage and civil conspiracy as to all the non-NAPC defendants. The judgment of the district court is also reversed as to Vista's claim against Lepple and Regitz for breach of fiduciary duty. The district court's judgment is affirmed in all other respects. Each party is to bear its own costs.
AFFIRMED in Part, REVERSED in Part.
ALARCON, Circuit Judge, concurring in part and dissenting in part:
I concur in Sections 1, 2, 3, 4, 5, 6, 8, 9, 10, and 11. I respectfully dissent from the majority's conclusions in Section 7, I would reverse and remand the order of the district court dismissing Vista's claim alleging a contractual cause of action for breach of the implied covenant of good faith and fair dealing.
Under California law a party can be liable for terminating a contract without good cause if an express provision of the agreement precludes termination without a showing of good cause. As discussed above, the evidence does not demonstrate that there was an express provision in the 1981 agreement that it could not be terminated in the absence of a showing of good cause.
California law also provides that a condition that a contract cannot be terminated without a showing of good cause can be implied from the conduct of the parties. Foley v. Interactive Data Corporation, No. L.A. 32148, slip op. at 26 (Cal.Sup.Ct. Dec. 29, 1988). The California Supreme Court concluded in Foley that under basic contract principles "implied-in-fact contract terms ordinarily stand on equal footing with express terms." Id. at 29. Vista did not assert a cause of action for breach of an implied-in-fact contractual agreement.
In its first cause of action, Vista alleged a breach of an implied covenant of good faith and fair dealing. Vista prayed for " [g]eneral and special damages as conform to proof" for the alleged breach of the implied covenant of good faith and fair dealing. In addition, Vista sought punitive damages for this alleged breach. Thus, Vista sought compensatory damages for breach of contract and punitive damages under a tort theory.
Vista's complaint alleges that each of the written agreements Vista made with NAPC "had an implied covenant of good faith and fair dealing." The complaint alleges further that the reason for the termination of the 1981 agreement was " [p]laintiff's objection to NAPC's unlawful practices of 'stuffing' and 'cooking the books....' " Vista alleged that this conduct violated public policy. Finally, it is asserted in the complaint that NAPC's conduct violated its duty to do nothing to deprive it of the benefits of its contract. Vista presented evidence to support each of these allegations in its opposition to the motion for summary judgment. The district court failed to determine whether this evidence was sufficient to raise triable issues of fact on a contractual claim for breach of the implied covenant of good faith and fair dealing.
The district court rejected Vista's contract claim on the ground that under California law the implied covenant of good faith and fair dealing is limited to employment contracts. The district court concluded that the California doctrine implying a "good cause provision" does not extend to commercial contracts. In Foley, the California Supreme Court held that " [e]very contract imposes upon each party a duty of good faith and fair dealing in its performance and enforcement." Id. at 41. (emphasis added) (quoting Rest.2d contracts, Sec. 205). In Foley the California Supreme Court also noted that " [b]ecause the covenant is a contract term, however, compensation for its breach has almost always been limited to contract rather than tort remedies." Id. The California Supreme Court in Foley disapproved of lower court decisions that had held that breach of the implied covenant of good faith and fair dealing in an employment agreement provides the basis for an action in tort. Id. at 53-73.
The district court's conclusion that Vista could not assert a contract claim for breach of the implied covenant of good faith and fair dealing because no employment relationship existed between Vista and NAPC is inconsistent with California law as explained in Foley. Contrary to the district court's conclusion, a covenant of good faith and fair dealing is implied in every contract. In fairness to the district court, it should be noted that Foley was decided long after the district court ruled in this matter.
The district court also rejected Vista's tort claim for breach of the implied covenant of good faith and fair dealing. In its opening brief, Vista abandoned its tort claims based on breach of the implied covenant of good faith and fair dealing.
Because the district court failed to determine whether Vista presented a valid contract claim, raising genuine issues of fact on the question whether NAPC breached the covenant of good faith and fair dealing in terminating Vista as the result of its complaints of illegal accounting practices, I would vacate and remand the dismissal of this claim for reconsideration in light of Foley.
This disposition is not appropriate for publication and may not be cited to or by the courts of this circuit except as provided by 9th Circuit Rule 36-3
In its opening brief Vista abandoned its tort claims based on breach of the implied covenant of good faith and fair dealing
Vista correctly claims that California law recognizes both a tort remedy and a contract remedy for termination of a contract in violation of public policy. See Tameny, 27 Cal. 3d at 174-75. Vista contends that although the availability of the tort remedy may be limited to employer/employee relationships (citing Tameny), there is no parallel limitation when only contract remedies are sought. This distinction has no basis in California law, and we decline to accept it. Vista's claims for relief under this theory--whether tort or contractual relief--stand and fall together, depending on whether California law prevents termination of an at-will commercial contract when such termination violates public policy