Reeves v. Hanlon - 33 Cal. 4th 1140, 17 Cal. Rptr. 3d 289, 95 P.3d 513 (2004)

Rule:

A plaintiff may recover damages for intentional interference with an at-will employment relation under the same California standard applicable to claims for intentional interference with prospective economic advantage. That is, to recover for a defendant's interference with an at-will employment relation, a plaintiff must plead and prove that the defendant engaged in an independently wrongful act--i.e., an act proscribed by some constitutional, statutory, regulatory, common law, or other determinable legal standard--that induced an at-will employee to leave the plaintiff. Under this standard, a defendant is not subject to liability for intentional interference if the interference consists merely of extending a job offer that induces an employee to terminate his or her at-will employment.

Facts:

Defendants Daniel P. Hanlon and Colin T. Greene resigned from plaintiff’s law firm and persuaded other employees to join them in their new firm. Consequently, plaintiff sued defendants, asserting 14 causes of action, including intentional interference with contractual relationships, interference with prospective business opportunity, conspiracy to interfere with prospective economic advantage, misappropriation of confidential information in violation of the Uniform Trade Secrets Act (UTSA), Civ. Code, § 3426 et seq., unauthorized use of a corporate car, and destruction of corporate property. Following the presentation of briefing, evidence, and arguments, the trial court concluded that the defendants had assumed fiduciary duties to the law firm and had engaged in interference with contracts and prospective business opportunity, and misappropriation of trade secrets. The trial court held that the defendants resigned from the law firm without notice or warning, had persuaded employees of the law firm to join the defendants’ new firm, had personally solicited the law firm’s clients, had misappropriated trade secrets, had destroyed computer files and data, and had withheld property, including a corporate car. The court reduced the damages award to $150,000 pursuant to the parties' stipulation, and judgment was entered accordingly. The appellate court affirmed the judgment, concluding that the law firm’s interference and misappropriation of trade secrets claims were legally sound and substantially supported by the record. Defendants appealed. 

Issue:

Could the defendants be held liable under an intentional interference theory for having induced at-will employees to quit working for the law firm? 

Answer:

Yes.

Conclusion:

The Court noted that an employer could recover damages for intentional interference with its at-will employment relations under the same California standard applicable to claims for intentional interference with prospective economic advantage. According to the Court, a plaintiff seeking recovery for interference with prospective economic advantage must plead and prove that the defendant engaged in an independently wrongful act in disrupting the relationship. In this case, it was undisputed that the defendants engaged in unlawful and unethical conduct in mounting a campaign to deliberately disrupt the law firm’s business. The Court held that the defendants did not simply extend job offers to the law firm’s at-will employees; it engaged in unlawful acts that crippled the law firm’s business operations and caused its personnel to terminate their at-will employment contracts. The Court also held that the defendants violated the UTSA by using the confidential client list of the law firm to directly solicit clients. In addition, there was evidence that the defendants’ business announcements caused many of the law firm’s clients to believe that the firm had gone out of business. Accordingly, the judgment of the appellate court was affirmed.