Why it matters
A California appellate court weighed in on intentional interference with contractual relations and prospective economic advantage in a suit brought by a terminated employee. Dan Popescu sued Apple, alleging the tech giant got him fired in retaliation for his resistance to Apple’s allegedly illegal anticompetitive conduct. A trial court judge dismissed the suit but the appellate panel reversed, writing that an employee whose at-will employment contract is terminated as a result of a third party’s interference need not allege that the defendant’s conduct was independently wrongful to state a contract interference claim. Neither did Popescu need to allege that he was directly harmed by an independently wrongful act as long as he claimed that Apple’s wrongful act interfered with his economic relationship with his employer, the court explained.
An aluminum engineering manager who developed cutting-edge alloys for high-tech customers, Dan Popescu was employed by Constellium. He received exemplary performance reviews and when the company was contacted by Apple for a new project, he was designated as the lead employee.
Apple was considering changes to the aluminum look and design of products including the MacBook, iPad, and iPhone. Popescu oversaw the project, which involved Constellium sharing a large degree of information with Apple, including its trade secrets regarding aluminum alloy manufacturing formulas and processing. Apple presented Constellium with a “Development Agreement” containing what Popescu felt were overly restrictive terms. He refused to sign.
At a meeting in Cupertino with Apple, Popescu again refused to sign the contract. He also inadvertently activated the recording feature of his smartpen, resulting in an Apple attorney confiscating the pen, insisting that Constellium launch an investigation into the incident, and requesting Popescu’s termination. When Popescu’s supervisors resisted, Apple appealed to the management of the private equity firm that owned Constellium.
Popescu was terminated for cause. According to his subsequent California state court complaint against Apple, he was then unable to obtain other employment in the aluminum alloy industry. Popescu alleged interference with contractual relations (contract interference) and intentional interference with prospective economic advantage (business interference).
He claimed that Apple wanted to use the Development Agreement to restrict competition in the smartphone market. By locking up suppliers with the agreement, Apple would be free to develop its own alloy body for its product, Popescu said, with anticompetitive effects on elite aluminum suppliers, consumer electronics companies, smartphone manufacturers, and consumers.
Not surprisingly, Apple moved to dismiss. A trial court granted the motion, holding that Popescu failed to state a cause of action for contract interference because his allegations demonstrated that he was an at-will employee, while his business interference claims failed because he did not allege that Apple had committed an independently unlawful act when it encouraged Constellium to launch an investigation into the recording incident.
An appellate panel reversed.
First tackling the claim of contract interference, the court rejected Apple’s argument that it could not be liable as it was “not a stranger” to the contract. Although a noncontracting party to Popescu’s employment, Apple had a legitimate interest in the scope or course of the contract’s performance, Apple said, based on its relationship with Constellium.
But the court was not persuaded. An extension of existing case law “to immunize a third party from tortious interference claims simply because the third party asserts some economic or other interest in a contract would significantly undercut the tort itself and the public policy underlying it,” the panel wrote. Apple’s relationship to the agreement between Constellium and Popescu “was wholly tangential,” the court added, holding that “even as a third party having some interest in the manner in which Popescu performed his employment agreement with Constellium, [Apple] is not immune from tort liability for interfering with his contract.”
Agreeing with the trial court that Popescu had an at-will employment relationship with Constellium, not a for-cause agreement, the panel said he could still state a contract interference claim despite a 2004 California Supreme Court decision, Reeves v. Hanlon. In that case, the court considered a claim by a former employer whose at-will employee was hired away by a new employer, ruling that because of the dual policy concerns of employee mobility and the promotion of legitimate competition, the former employer had to show that the new employer’s conduct in recruiting and hiring its at-will employee was independently wrongful.
“Those same policy considerations do not exist here,” the court said, distinguishing Reeves. “This case involves an employee—not his former employer—suing a third party for interfering with his employment agreement. We thus hold that Reeves does not require Popescu to allege or prove as part of his contract interference claim that Apple’s conduct in interfering with his at-will employment contract was independently wrongful.”
Since Reeves did not apply and the plaintiff alleged each of the elements of a contract interference claim, the court reversed dismissal of the cause of action.
Turning to the business interference claim, the panel explained that Popescu had alleged an independent wrongful act by the defendant beyond the fact of the interference itself when he stated in his complaint that Apple’s conduct in persuading Constellium to terminate him was “interconnected” with Apple’s larger goal of requiring Constellium to sign the Development Agreement and “thereby complete its fraud of Constellium, further misappropriate its trade secrets, obtain non-trade secret information and materials, and restrict competition in the smartphone market.”
Accepting the allegations as true as required at this stage in the litigation, the court said the anticompetitive acts alleged by Popescu—purported violations of the Sherman Antitrust Act, the Cartwright Act, and the Uniform Trade Secrets Act, among others—satisfied the pleading standards for the claim. Apple’s argument that the alleged conduct did not directly impact Popescu was irrelevant, the court added.
The wrongful conduct alleged does not have to be wrongful toward the plaintiff, the panel wrote: “[W]e find no sound reason for requiring that a defendant’s wrongful actions must be directed toward the plaintiff seeking to recover for this tort.”
With both causes of action back in play, the appellate panel remanded the case back to the trial court.
To read the opinion in Popescu v. Apple Inc., click here.