Court Finds Trader Joe's To Be A Stranger

To paraphrase Rudyard Kipling, tort is tort and contract is contract, and never the twain shall meet.  Ballad of East and West ("Oh, East is East, and West is West, and never the twain shall meet, Till Earth and Sky stand presently at God’s great Judgment Seat . . . .").  Alas, there is always a linger danger of the "tortification" of contract law.  Often, this arises when someone sues for intentional interference with contractual relations.  

Although recognizing the tort of interference with a contract, the California Supreme Court has tried to preserve the separation of tort and contract law by holding that "the tort cause of action for interference with a contract does not lie against a party to the contract".  Applied Equipment Corp. v. Litton Saudi Arabia Ltd., 7 Cal. 4th 503 (1994).  In other words, tort liability may exist against a stranger but not a contract party.  Although the principle is easy state, the problem for the courts often lies in determining whether the defendant was a stranger to the contract.

In a decision published yesterday, the California Court of Appeal held that the popular Trader Joe's grocery was a stranger to a food broker's contracts with two food suppliers to Trader Joe's.   Redfearn v. Trader Joe's Company, 2018 Cal. App. LEXIS 148 (Feb. 27, 2018).  In this situation, the broker could only perform its contracts with the suppliers if Trader Joe's decided to purchase product from those suppliers.  Thus, Trader Joe argued that it was not a stranger under PM Group, Inc. v. Stewart, 154 Cal. App. 4th 55 (2007) which broadly stated a noncontracting party is not a stranger when that party's performance is necessary to the plaintiff's contract performance. The Second District Court of Appeal decided both PM Group  and Redfearn Court.  One might, therefore, have expected the same result.  The Redfearn court, however, found that their colleagues had "misidentified the fundamental defect in the interference the interference claim".  Thus, the Redfearn court disagreed with the reasoning in PM Group, but not its outcome.  According to the Redfearn court, the defect in PM Group was that the plaintiff had failed to allege that the defendant had engaged in any intentional acts designed to induce a breach of the plaintiff's contract.  The defendant had simply decided not to perform.  In contrast, the plaintiff in Redfearn had alleged such acts on the part of Trader Joe's.