LiMandri v. Judkins
97 Cal. Daily Op. Serv. 690, 60 Cal. Rptr. 2d 539, 52 Cal. App. 4th 326 (1997)
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Rule of Law:
A claim for intentional interference with an existing contractual relationship does not require the plaintiff to plead and prove that the defendant's conduct was wrongful by some measure other than the fact of the interference itself. This 'independently wrongful' requirement applies only to claims for interference with prospective economic advantage.
Facts:
- Charles S. LiMandri had a written fee agreement with his clients, the Deddehs, which entitled him to an hourly rate plus 20 percent of any recovery from litigation over contaminated real property.
- Greg D. Judkins, an attorney for Security Trust Company (Security), contacted LiMandri to inquire about the status and settlement value of the Deddehs' pending lawsuit.
- During their conversation, Judkins did not disclose that his client, Security, had given the Deddehs a $1.45 million loan and, in connection with that loan, the Deddehs had granted Security a lien against their share of any proceeds from the lawsuit.
- Judkins subsequently filed a notice of lien in the state court action on behalf of Security, asserting a right to any proceeds payable to the Deddehs.
- This notice of lien was filed without LiMandri's knowledge but bore LiMandri's name, address, and state bar number, making it appear as if he had prepared it.
- After the underlying litigation settled for $2.5 million, the competing liens asserted by LiMandri and Judkins (for Security) led to the Deddehs' share of the funds being deposited into a federal court interpleader account.
- As a result, payment of LiMandri's attorney fees from the Deddehs' share was tied up for over seven months, causing him to incur over $110,000 in additional fees and costs to resolve the lien dispute.
Procedural Posture:
- Charles S. LiMandri filed a complaint against Greg D. Judkins in California superior court (trial court), alleging multiple causes of action, including interference with prospective economic advantage.
- Judkins filed a general demurrer to the complaint.
- The trial court sustained Judkins's demurrer as to all causes of action without leave to amend.
- A judgment of dismissal was entered in favor of Judkins.
- LiMandri (appellant) appealed the judgment of dismissal to the California Court of Appeal, where Judkins was the respondent.
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Issue:
Does an attorney's action to secure and assert a lien for his client on litigation proceeds, with knowledge of another attorney's pre-existing contractual fee agreement lien on those same proceeds, constitute an actionable claim for intentional interference with contractual relations, even if the conduct is not independently wrongful?
Opinions:
Majority - Benke, Acting P. J.
Yes, an attorney's action to secure and assert a competing lien can constitute intentional interference with contractual relations. The court distinguished between the torts of intentional interference with an existing contract and interference with prospective economic advantage. Following the Supreme Court's decision in Della Penna, the court held that the heightened requirement to plead and prove that the defendant's conduct was 'wrongful by some legal measure other than the fact of interference itself' applies only to claims involving prospective economic advantage, not to those involving existing, formal contracts. For interference with an existing contract, a plaintiff need only plead: (1) a valid contract, (2) defendant's knowledge of the contract, (3) defendant's intentional acts designed to disrupt the contractual relationship, (4) actual disruption, and (5) resulting damages. Here, LiMandri sufficiently pleaded all five elements, as Judkins knew of the fee agreement and intentionally created and asserted a competing lien that disrupted LiMandri's ability to be paid. The court also held that the litigation privilege did not bar the claim because Judkins's actions constituted a tortious course of conduct, not merely a privileged communication, and he was not a participant in the underlying litigation whose actions were related to the objects of that case.
Analysis:
This decision solidifies the distinction established in Della Penna v. Toyota Motor Sales, U.S.A., Inc., creating a two-tiered standard for interference torts. It provides greater legal protection for formalized, existing contracts by removing the significant hurdle of proving the defendant's conduct was independently wrongful. This holding makes it easier for plaintiffs, like attorneys with contingency fee agreements, to hold third parties accountable for knowingly disrupting those agreements. The case also clarifies the narrow scope of the litigation privilege, confirming it does not shield a non-party's tortious course of conduct that is not substantively related to the objectives of the pending litigation.
