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April 27, 2009

Davis v. Nadrich (2009) 174 Cal.App.4th 1

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The Second District holds that a referral source, who began directing cases to one partner after told of the partnership’s dissolution, could not be liable for intentional interference with contract. 

 Joseph Davis and John Heubeck formed the law partnership of Davis & Heubeck for an indefinite term specializing in asbestos and toxic torts.  The firm ceased being profitable and there was a dispute between Davis and Heubeck about when they decided to dissolve the partnership.  At the time Heubeck claimed the partnership dissolved, Heubeck had not notified the State Bar or listed his personal law firm on the building where he still shared space with Davis.  Prior to the date Davis claimed the partnership dissolved Ira Nadrich decided to refer asbestos and toxic tort cases to Heubeck individually, and not to the Davis & Heubeck firm.  Nadrich’s law partner Cohen had no knowledge of the circumstances under which Nadrich referred cases to Heubeck and had no knowledge of the terms of such referrals.

Davis never met nor spoke to Nadrich or Cohen nor was Davis or Davis & Heubeck ever retained by any client to prosecute any case referred by Nadrich to Heubeck.  Davis knew, and did not protest, that the Nadrich cases were being prosecuted by the Law Offices of John C.  Heubeck.  However, according to Davis, Heubeck litigated the cases using Davis & Heubeck resources and he was to receive a percentage of the Nadrich referred cases.

When Heubeck discovered that Davis had taken a significant amount of money from a Davis & Heubeck account he left the offices he had been sharing with Davis and notified Davis & Heubeck’s employees and clients that Davis & Heubeck was dissolving.

Davis filed a lawsuit against Nadrich, Cohen, and Nadrich & Cohen, LLP.  The claims against Nadrich, his partner, and his firm were for intentional interference with economic relationship.  Davis alleged that the Nadrich defendants knew of the economic relationship between Davis and Heubeck yet met with Heubeck and falsely represented that Davis would not pay referral fees with the intent to harm Davis financially and to induce Heubeck to breach his contract.  The Nadrich defendants were thereby able to obtain greater referral fees from Heubeck alone than they would have from Davis & Heubeck.  Davis also asserted a claim for negligent interference with economic relationship premised on the same facts.

The trial court granted the Nadrich defendants’ motion for summary judgment and the Court of Appeal affirmed.  Under California law there is no cause of action for negligent interference with contractual relations as contrasted with causes of action for intentional interference with contractual relations and negligent interference with prospective economic advantage

The court found unpersuasive Davis’s argument that there was a triable issue of fact with regard to the tort of interference with contractual relations.  The tort of intentional interference with contractual relations requires: (1) a valid contract between plaintiff and a third party; (2) defendant’s knowledge of this contract; (3) defendant’s intentional acts designed to induce a breach or disruption of the contractual relationship; (4) actual breach or disruption of the contractual relationship; and (5) resulting damage.  While this is an intentional tort, it does not require that the defendant act with specific intent to interfere.  The tort will apply if the actor knows that the interference is certain or substantially certain to occur as a result of his action.  The rule applies to an interference that is incidental to the actor’s independent purpose and desire but known to him to be a necessary consequence of his action.

Davis offered no evidence that his contract with Heubeck precluded either partner from accepting individual referrals, could not show that Nadrich interfered with the terms of the Davis/Heubeck contract, and could not show that there was an actual breach of the partnership contract with Heubeck.  Nor did Davis show that Nadrich was sufficiently aware of the details of the Davis/Heubeck partnership contract to form an intent to harm it.  Nadrich and Heubeck, submitted evidence that Heubeck had informed Nadrich that Davis & Heubeck was in dissolution, but remained open to wind-up its existing cases, and that Heubeck had begun his own practice and was accepting cases apart from Davis & Heubeck, a fact of which Davis was aware.  Further, Heubeck declared that Davis had no financial interest in the cases referred by Nadrich.

The court rejected the assertion that Nadrich had no right to rely upon Heubeck’s statements and should have investigated further.  Any duty Nadrich had was discharged by speaking to Heubeck, who had knowledge of the Davis-Huebeck partnership.  No triable issue of fact was raised by a letter Nadrich wrote to Huebeck at “Davis & Huebeck” requesting an accounting of referred cases, because this was consistent with the fact that at the time Davis & Huebeck existed to wind down their cases.  An unsigned fee sharing agreement between Davis & Heubeck and Nadrich & Associates on a specific lawsuit had no evidentiary value because it was unauthenticated.  Huebeck’s secretary’s declaration that Huebeck told her that he and Mr.  Davis would try Nadrich referral cases did not show Nadrich’s knowledge of the parameters of the Davis/Heubeck contract.

Comment: Huebeck could have avoided this dispute with a clear delineation of the rights and responsibilities of the partners upon dissolution.  This particular partnership battle drew an important referral source into its net.


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