Opinion
NOT TO BE PUBLISHED IN OFFICIAL REPORTS
Appeal from a judgment of the Superior Court of Orange County Super. Ct. No. 06CC07692, Andrew P. Banks, Judge. Affirmed in part and remanded.
Law Offices of Carl F. Agren, Carl F. Agren and Kathleen M. Hatley for Plaintiff and Appellant.
Grannan Law Office and Patrick J. Grannan for Defendants and Respondents.
OPINION
MOORE, J.
The court entered a default in favor of plaintiff after defendants failed to appear. After review of the pleadings and the evidence submitted to support its default prove-up, the court entered judgment in favor of two of the three defendants, concluding that plaintiff had failed to establish a prima facie case. We agree and find the court’s judgment was not an abuse of discretion. At oral argument, the parties conceded that neglecting to include the third defendant in the minute order granting judgment to the other defendants was a clerical error. Thus, we remand for the trial court to amend the judgment appropriately.
I
FACTS
Troystar Investments, Inc. (Troystar) conducts business under the name Century 21 All Pro. Until June 2006, Glenda Prentice was employed by Troystar as manager of its real estate brokerage office. According to the complaint, Troystar discovered that Prentice and Zabi Sabat were encouraging its employees to leave Troystar for Sabat’s competing Century 21 office, known as Century 21 United. Troystar believed that Prentice was conspiring with Sabat to solicit its agents and employees and misappropriating trade secret information.
Troystar sued Prentice, Sabat and Century 21 United (collectively defendants) for unfair competition, misappropriation of trade secrets, and intentional and negligent interference with economic relationships. None of the claims alleged specific amounts of damages, although in both the first and third causes of action, the complaint alleges: “Such damages could well exceed $1,000,000.00 if the unfair competition and use of confidential trade secret information is not stopped.”
The caption of the complaint lists breach of contract as another cause of action, yet it is not pled anywhere in the complaint. We therefore disregard it.
According to Troystar, defendants demurred to the complaint. The demurrer was overruled except as to the misappropriation of trade secrets cause of action. Troystar states it chose not to replead that claim, and instead proceeded with the three remaining claims. Neither the demurrer nor the court’s ruling on it are included in the record on appeal, but given that defendants do not dispute this account of events, we accept it at face value.
Defendants apparently never filed an answer to the remaining causes of action in the complaint. They failed to appear at a case management conference in November 2006, and the court ordered Troystar’s counsel to give notice that an order to show cause regarding sanctions and the entry of default against defendants was scheduled. Defendants again failed to appear at the noticed hearing, and the court ordered defendants’ defaults to be entered. The court set a hearing for April 2007, which would be ordered off calendar if a judgment or a full dismissal had been entered with the court. Troystar provided written notice to defendants that their defaults had been entered.
On February 14, 2007, Troystar submitted an application for court judgment. The application requested special damages of $376,878, general damages of $753,756, and costs of $3,287.08, totaling $1,133,921.08. On February 27, Troystar filed a memorandum to set the prove-up hearing for March 21. Also filed was the declaration of James M. LaPeter, president of Troystar. His six-page declaration outlined Troystar’s grievances against defendants, highlighting Prentice’s access to confidential information and defendants’ solicitation of Troystar employees.
The declaration explained that Troystar had calculated its damages by calculating the commission income for three years of the employees who had been solicited away by defendants. Although Troystar’s employees were at-will, LaPeter asserted the average length of employment was three years, and many employees stayed longer. “For the purposes of this default judgment, I am requesting (a) three years average lost commission to plaintiff; (b) punitive and exemplary damages, which were sought in the Complaint; plus (c) injunctive relief as sought in the Complaint . . . .” Thus, the special damages requested ($376,878) represented Troystar’s calculation of its future lost income and the general damages ($753,756) were punitive damages.
No prove-up hearing was held. The court took the affidavit under submission, and on March 28 ruled as follows: “Judgment ordered in favor of Defendants Zabi Sabat and Century 21 United. Court finds Plaintiff has failed to meet its burden of proof on all causes of action.” Troystar subsequently requested a statement of decision and a clarification as to Prentice, who was not mentioned in the court’s ruling. The court denied the request for a statement of decision, noting that the matter had been heard in less than one day and no statement of decision had been requested upon submission. No mention was made of Prentice. Troystar now appeals.
II
DISCUSSION
Troystar’s key argument is that the trial court erroneously held it to an inappropriate standard of proof given the default setting. The standard of review on appeal from the damages awarded in a default judgment is abuse of discretion. “‘The power of an appellate court to review the trier of fact’s determination of damages is severely circumscribed. An appellate court may interfere with that determination only where the sum awarded is so disproportionate to the evidence as to suggest that the verdict was the result of passion, prejudice or corruption [citations] or where the award is so out of proportion to the evidence that it shocks the conscience of the appellate court. [Citations.]” (Johnson v. Stanhiser (1999) 72 Cal.App.4th 357, 361.)
In default proceedings, generally speaking, the allegations of the complaint are admitted. (Sporn v. Home Depot USA, Inc. (2005) 126 Cal.App.4th 1294, 1303.) Relief is granted pursuant to the pleadings. “‘A judgment by default is as conclusive as to the issues tendered by the complaint as if it had been rendered after answer filed and trial had on allegations denied by the answer. [Citations.]’” (Flood v. Simpson (1975) 45 Cal.App.3d 644, 651, fn. 12.) The complaint, however, along with any evidence taken in support of the prove-up, must state a prima facie case for relief. We thus review each of Troystar’s claims in turn to determine if a prima facie case was established.
Common Law Unfair Competition
Troystar’s opening brief states: “Unfair competition is defined in Business and Professions Code § 17200 as including any unfair business act or practice. Damages are available for a common law unfair competition claim.” Troystar thus tacitly (and accurately) admits that damages are not available for a claim under Business and Professions Code section 17200. (Bank of the West v. Superior Court (1992) 2 Cal.4th 1254, 1266.) The facts it presents, however, are entirely in support of such a statutory rather than a common law claim. Troystar’s focus is on Prentice’s solicitation of its employees, the use of confidential information, and her duty of loyalty to Troystar.
None of these facts, however, support common law unfair competition: “The common law tort of unfair competition is generally thought to be synonymous with the act of ‘passing off’ one’s goods as those of another. The tort developed as an equitable remedy against the wrongful exploitation of trade names and common law trademarks that were not otherwise entitled to legal protection.” (Bank of the West v. Superior Court, supra, 2 Cal.4th at p. 1263.) The only facts that Troystar asserts that might cognizably support such a claim are not in the complaint, but in LaPeter’s declaration. He briefly asserted that defendants began running advertisements that copied the “form and substance” of Troystar’s ads. No such allegation was included in the complaint, and this assertion in the affidavit alone was insufficient to create a prima facie case of unfair competition. Even if the same language had been in the complaint, it failed to allege that defendants were attempting to pass itself off as Troystar, or that the requested damages resulted from such passing off. Thus, the trial court properly found no prima facie case of common law unfair competition.
Intentional Interference with Economic Advantage
“The elements of a cause of action for interference with prospective economic advantage are: (1) an economic relationship between the plaintiff and a third party, with the probability of future economic benefit to the plaintiff; (2) the defendant’s knowledge of the relationship; (3) the defendant’s intentional and wrongful conduct designed to interfere with or disrupt this relationship; (4) interference with or disruption of this relationship; and (5) economic harm to the plaintiff proximately caused by the defendant’s wrongful conduct. [Citation.]” (Sole Energy Co. v. Petrominerals Corp. (2005) 128 Cal.App.4th 212, 241.) Further, the plaintiff must plead and prove the alleged conduct “wrongful by some legal measure other than the fact of interference itself.” (Della Penna v. Toyota Motor Sales, U.S.A., Inc. (1995) 11 Cal.4th 376, 393.)
Neither the allegations of the complaint or the supporting evidence support the existence of an existing economic relationship. Plaintiff must establish “the existence of an economic relationship with some third party that contains the probability of future economic benefit to the plaintiff.” (Korea Supply Co. v. Lockheed Martin Corp. (2003) 29 Cal.4th 1134, 1164.) Here, Troystar points to defendants’ misappropriation of its customer databases and solicitation of its employees in an entirely general manner.
The tort protects the expectation the relationship will produce the desired benefit, not “‘the more speculative expectation that a potentially beneficial relationship will arise.’” (Ibid.) “Only plaintiffs that can demonstrate an economic relationship with a probable future economic benefit will be able to state a cause of action for this tort.” (Ibid.) Thus, the trial court could properly find Troystar did not establish a prima facie case of interference with prospective economic advantage.
With respect to the defendants other than Prentice, Troystar also fails to establish the required wrongfulness beyond the interference itself. An act is independently wrongful “if it is unlawful, that is, if it is proscribed by some constitutional, statutory, regulatory, common law, or other determinable legal standard.” (Korea Supply Co. v. Lockheed Martin Corp., supra, 29 Cal.4th at p. 1159, fn. omitted.) Troystar’s allegations support only the notion that a competitor attempted to entice away Troystar’s employees. That is not unlawful by any standard.
We disregard the allegations regarding purported theft of trade secrets, noting that the trial court sustained defendants’ demurrer to that claim.
Further, the measure of damages sought by Troystar is entirely speculative, based on the past performance of admittedly at-will employees. It does not establish a prima facie case that it suffered any damage, but relied on speculation: “If plaintiff’s method of doing business and databases were not valuable to defendant Sabat, why did he bother to recruit Troystar’s staff?” Thus Troystar speculates that doing so must have had economic value and therefore resulted in damage. But this is speculation, not evidence, and provides another ground based upon which the trial court could properly find the lack of a prima facie case.
Negligent Interference with Economic Advantage
Troystar also asserts negligent interference with economic advantage, although its briefs fail to distinguish between the negligent and intentional versions of this claim. “The tort of negligent interference with prospective economic advantage is established where a plaintiff demonstrates that (1) an economic relationship existed between the plaintiff and a third party which contained a reasonably probable future economic benefit or advantage to plaintiff; (2) the defendant knew of the existence of the relationship and was aware or should have been aware that if it did not act with due care its actions would interfere with this relationship and cause plaintiff to lose in whole or in part the probable future economic benefit or advantage of the relationship; (3) the defendant was negligent; and (4) such negligence caused damage to plaintiff in that the relationship was actually interfered with or disrupted and plaintiff lost in whole or in part the economic benefits or advantage reasonably expected from the relationship. [Citations.]” (North American Chemical Co. v. Superior Court (1997) 59 Cal.App.4th 764, 786.)
As with the intentional variety of the tort, the plaintiff must also establish the conduct was independently wrongful. (National Medical Transportation Network v. Deloitte & Touche (1998) 62 Cal.App.4th 412, 438-439.) Further, “recovery for negligent interference with prospective economic advantage will be limited to instances where the risk of harm is foreseeable and is closely connected with the defendant’s conduct, where damages are not wholly speculative and the injury is not part of the plaintiff’s ordinary business risk.” (J’Aire Corp. v. Gregory (1979) 24 Cal.3d 799, 808.)
For the same reasons as discussed ante, Troystar failed to establish a prima facie claim. With respect to the defendants other than Prentice, Troystar failed to establish independently wrongful conduct. Moreover, even if the remaining elements were properly established, Troystar’s purported damages are “wholly speculative,” for the same reasons discussed.
Glenda Prentice
At oral argument, the parties conceded that the omission of Prentice from the minute order was a clerical error. We therefore remand for the limited purpose of amending the judgment to include Prentice.
III
DISPOSITION
The judgment is affirmed as to defendants Sabat and Century 21 United. As to Glenda Prentice, the matter is remanded for the purpose of amending the judgment to include her as a defendant. Defendants are entitled to their costs on appeal.
WE CONCUR: RYLAARSDAM, ACTING P. J. FYBEL, J.