Technology for Energy Corp. v. Scandpower, A/S

880 F.2d 875, 1989 WL 81810
CourtCourt of Appeals for the Sixth Circuit
DecidedJuly 26, 1989
DocketNo. 88-5761
StatusPublished
Cited by7 cases

This text of 880 F.2d 875 (Technology for Energy Corp. v. Scandpower, A/S) is published on Counsel Stack Legal Research, covering Court of Appeals for the Sixth Circuit primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Technology for Energy Corp. v. Scandpower, A/S, 880 F.2d 875, 1989 WL 81810 (6th Cir. 1989).

Opinion

KENNEDY, Circuit Judge.

Appellant Technology for Energy Corporation (“TEC”) brought a tort action alleging intentional interference with prospective economic advantage against Scandpower, A/S and its American subsidiary Scand-power, Inc. (collectively “Scandpower”); Radcal Engineering, Inc. (“REI”); Fluid Components, Inc. (“FCI”); Robert D. Smith; James P. Waring; Malcom M. McQueen; and Robert A. Deane. TEC and Scandpower reached a settlement prior to trial. At the close of TEC’s case against the remaining defendants, the district court granted defendants’ motion to dismiss pursuant to Fed.R.Civ.P. 41, and TEC brought this appeal. We conclude that TEC failed to prove that it probably would have obtained the contract but for defendants' wrongful interference, as required by California law. Accordingly, the judgment of the District Court is affirmed.

I.

In 1976, Scandpower developed and patented a technology known as RADCAL, which is used to monitor conditions inside nuclear reactors. Defendant Smith was a co-inventor of the technology. Lacking the resources for commercial development of the RADCAL technology, Scandpower wished to find a joint venture partner in the United States. In early 1983, Scand-power and TEC began protracted negotiations concerning a possible joint venture or exclusive license. No formal agreement was ever reached. However, the District Court found that “the parties did expressly agree to permit TEC to sell RADCAL technology on a ‘case-by-case’ basis.” TEC entered into several contracts to supply RAD-CAL technology over the ensuing months.

In late 1983 and early 1984, TEC suffered a downturn in its business, prompting Smith and Waring to consider other possible joint-venture partners. Smith and other Scandpower officials began discussions with FCI in 1984, but negotiations with TEC continued.

The District Court found that “[sjome-time prior to February 1, 1985,” TEC submitted a bid on the contract which is the subject of this dispute — a contract to supply RADCAL technology to the Sacramento Municipal Utility District (“SMUD”). Scandpower and TEC had reached “case-by-case” agreement permitting TEC to seek the SMUD contract.

At about the same time, “early 1985,” Scandpower granted the exclusive rights to manufacture and market RADCAL technology in the United States to REI, a corporation formed by Smith and Waring. REI then granted a sublicense to FCI.

At its board meeting of March 7, 1985, SMUD apparently was about to accept TEC’s bid when Smith and officials of FCI represented to SMUD that TEC was in dire [877]*877financial straits and that TEC had no rights to RADCAL technology. The District Court found that the first representation was true, but the second was false, since Scandpower had given TEC “case-by-case” permission to pursue the SMUD contract.1 SMUD asked TEC to produce a supply bond or letter of credit and documentation of its rights to RADCAL technology. TEC was unable to satisfy either request, and SMUD rejected its bid. Based on the statements of SMUD officials, the District Court determined that failure to comply with either request — standing alone— would have caused SMUD to reject TEC’s bid.

II.

On appeal TEC does not challenge the District Court’s factual findings, but only its legal conclusion that TEC’s damages were not proximately caused by defendants. Under California law,2 proof of “damages to the plaintiff proximately caused by the acts of the defendant” is an essential element of the tort of interference with prospective economic advantage. Buckaloo v. Johnson, 14 Cal.3d 815, 827, 122 Cal.Rptr. 745, 752, 537 P.2d 865, 872 (1975). The District Court found that plaintiff had not proved the existence of this element, because TEC’s injury resulted from an “intervening cause” — TEC’s failure to provide the documentation and financial assurances required by SMUD — not from the defendants’ actions. We conclude that this analysis misapplied the law of causation. An intervening cause “is one which operates without respect to defendant’s alleged cause. It would have been operating ... if defendant’s cause was wholly out of the picture.” Werkman v. Howard Zink Corp., 97 Cal.App.2d 418, 218 P.2d 43, 48 (1950). TEC’s failure to provide the requested documentation cannot be deemed an intervening cause, because SMUD’s request for documentation was prompted by defendants’ allegedly tor-tious acts.

While we disagree with the District Court’s “intervening cause” analysis, we conclude that the decision below should be affirmed on other grounds. In order to make out a claim for intentional interference with prospective economic advantage, the plaintiff must meet a “threshold causation requirement” by adducing “proof that it is reasonably probable that the lost economic advantage would have been realized but for the defendant’s interference.” See Youst v. Longo, 43 Cal.3d 64, 71, 233 Cal.Rptr. 294, 298, 729 P.2d 728, 732 (1987) (emphasis in original). In addition:

It has been repeatedly held that a plaintiff, seeking to hold one liable for unjustifiably inducing another to breach a contract, must allege that the contract would otherwise have been performed, and that it was breached and abandoned by reason of the defendant’s wrongful act and that such act was the moving cause thereof.

Dryden v. Tri-Valley Growers, 65 Cal.App.3d 990, 997, 135 Cal.Rptr. 720, 725 (1977) (emphasis added); see also Augustine v. Trueco, 124 Cal.App.2d 229, 246, 268 P.2d 780, 791 (1954). The logic behind this requirement is obvious: it prevents the plaintiff from obtaining a “windfall” in the form of damages for interference with an economic opportunity which it would not have obtained even if the defendant had done nothing wrong.

[878]*878TEC cannot meet California’s threshold causation requirement. The District Court found that defendants’ statements concerning TEC’s RADCAL rights were false, but that their warning about TEC’s precarious financial situation was truthful. The court also found that FCI was privileged to compete with TEC for the SMUD project. SMUD had not yet awarded the contract; and since FCI was privileged to compete, it was not wrongful for FCI truthfully to inform SMUD about TEC’s financial difficulties. See, e.g., Environmental Planning and Information Council v. Superior Court, 36 Cal.3d 188, 194, 203 Cal.Rptr. 127, 131, 680 P.2d 1086, 1090 (1984) (“competitor’s stake in advancing his own economic interest” sufficient justification for interference where “contractual relations are merely contemplated or potential”). Acting on this information, SMUD requested a bond or letter of credit, but TEC was unable to procure either. The District Court found that this difficulty alone was sufficient to “doom” TEC’s bid. Therefore, it was not “reasonably probable” that TEC would have obtained the SMUD contract but for wrongful interference by FCI.

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Bluebook (online)
880 F.2d 875, 1989 WL 81810, Counsel Stack Legal Research, https://law.counselstack.com/opinion/technology-for-energy-corp-v-scandpower-as-ca6-1989.