Company that lost big competition can sue for unfair competition and intentional interference with prospective economic advantage

Law Reporter, Dec 2001

Korea Supply Co. v. Lockheed Martin Corp., 109 Cal. Rptr. 2d 417 (Ct. App. 2001).

A California appellate court held that a manufacturer's representative can sue for unfair competition and intentional interference with prospective economic advantage based on the loss of a competitive bid.

Here, Korea Supply Company represented a military equipment manufacturer in the sale of that equipment to a foreign government. The manufacturer submitted a bid against another company to sell material to the government. The other company's bid was accepted, even though the manufacturer's bid was lower. Consequently, Korea Supply did not earn its commission as representative. Korea Supply sued the successor of the company whose bid was accepted under Cal. Bus. and Prof Code (secsec)17200, alleging, among other claims, interference with prospective advantage and unfair competition. Specifically, plaintiff claimed that defendant secured the contract by wrongful means, such as bribes and sexual favors, intentionally interfering with plaintiff's attempt to secure a bid and consequent commission. The trial court dismissed the claim.

Reversing, the appellate court noted that (secsec)17200, which prohibits unfair competition, borrows violations from other laws by making them independently actionable as unfair competitive practices. In this case, the cause of action is borrowed from federal law, which prohibits the bribing of foreign government officials for the purpose of influencing any act or decision in their official capacity or inducing them to use their official influence to obtain business. The court rejected defendant's argument that, under federal law, a private action for unfair competition is barred because the law does not expressly provide for one. The state high court, the court said, has held that an action under (secsec)17200 may be based on a violation of a statute that does not expressly provide for a private right of action, unless (secsec)17200 itself or the statute expressly provides otherwise. Thus, an unfair competition action based on federal law would be barred only if federal law preempted it.

Turning to the claim for intentional interference with prospective economic advantage, the court said that a plaintiff bringing such a claim must plead and prove culpable intent on the part of defendant. Citing case law, the court noted that a plaintiff seeking to recover for alleged interference with prospective economic advantage must plead and prove that defendant's interference was wrongful by some measure beyond the fact of interference itself. Thus, plaintiff's claim that defendant knew of its expectancy and interfered with it by independent wrongful conduct, causing plaintiff to incur damages, is a sufficient statement of the cause of action, the court concluded.

Plaintiffs Counsel

Steven J. Cannata,

David W Kesselman, and

Maxwell M. Blecher, all of Los Angeles, Cal.