Since this isn’t a publication about intellectual property, I’ve been told that the readers, to my surprise and chagrin, don’t want to read about trademarks and copyrights every month. So, this month, I bring you an interesting moral story with a legal message. Aesop may have called it “The Wolf and the Goat,” but in the California courts, it goes by the name of Beckwith v. Dahl . Your narrator today is my litigation partner, John Heffner. John, the floor is yours.
While all might be fair in love and war, it isn’t in business. Under California law—whether you’re talking about an inheritance or a business—you can’t intentionally interfere with another’s prospective economic advantage. As courts explain, “The tort of intentional or negligent interference with prospective economic advantage imposes liability for improper methods of disrupting or diverting the business relationship of another which fall outside the boundaries of fair competition.” (Settimo Associates v. Environ Systems, Inc. [1993] 14 Cal. App. 4th 842, 845.)
And now, thanks to a recent decision by the California Court of Appeal, all is not fair when angling for that large inheritance. You may now face tort liability if you intentionally interfere with another’s inheritance. Such had been illegal in other states, but until May 2012, it wasn’t clear that such behavior was illegal in California. (Although the California Supreme Court could later decide this tort shouldn’t exist.)
While many of you are, hopefully, not plotting to interfere with someone’s inheritance, this recent case still provides a good reminder: Courts don’t like foul play. Snatching away a customer from a competitor can seem like mere capitalist competition, but be careful to remain with “the boundaries of fair competition.”
This recent case, Beckwith v. Dahl (2012) 205 Cal.App.4th 1039, involves what the court clearly sees as foul play. In this case, Marc MacGinnis drafted a will that would leave half his property to his life partner, Brent Beckwith, and the other half to his estranged sister, Susan Dahl. MacGinnis drafted his will on his computer, but never bothered to sign it. Because he never signed the will, it wasn’t valid. He then became terminally ill, and Dahl told him not to sign the will—she promised to have her attorney friends set up a trust to avoid probate and the taxes and expenses associated with probate. Further, Dahl assured the ailing MacGinnis that the trust would accomplish his intended result: Half of Mr. MacGinnis’ estate would go to her and the other half to Beckwith.
A few days later, MacGinnis’ health rapidly and unexpectedly deteriorated, and he died without signing the will and before establishing any trust. Dahl was aware of his deteriorating health, but Beckwith—because he wasn’t classified as a family member—was not. Dahl apparently could have had MacGinnis sign his will at this point, but failed to do so. Because Dahl was his only surviving relative, she then took all of his property through the probate process, and Beckwith received nothing.
Beckwith then sued Dahl for interfering with his expected inheritance. Had it not been for Dahl, MacGinnis would have signed his will, and Beckwith would have received half of the estate. The trial court threw out the lawsuit because a cause of action for interference with an expected inheritance doesn’t exist. The Court of Appeal, however, reversed and decided, upon these facts, to finally recognize a cause of action for intentional interference with expected inheritance. Specifically, the court recognized a cause of action for engaging in wrongful conduct to interfere with someone’s inheritance.
Dahl’s conduct, however, might not be so clearly foul. Maybe she really did intend to have a trust established, but it just took longer than the few days she had. Further, MacGinnis could have chosen to sign his will—why did he listen to his estranged sister? Or, why didn’t he simply hire an attorney at the outset to handle his estate planning? (Which, by the way, you all should do—I could fill several newspapers with stories of litigation that’s ensnared our clients because well-meaning individuals thought they didn’t need any estate planning.) In other words, MacGinnis could have avoided this situation from the beginning. Nonetheless, the Court of Appeal took these facts as an opportunity to establish a new tort to combat foul play.
These same basic rules apply to business. Just as a person cannot engage in wrongful conduct to disrupt an expected inheritance, a person cannot engage in wrongful conduct to disrupt another’s business relationship. It isn’t always clear, however, what’s wrongful and what isn’t, or what’s fair and what’s foul. Generally, the “wrongful conduct” must be independently actionable. It must, in other words, be something that, standing alone, is illegal. For example, a business cannot spread lies about a competitor with the intent to prevent the competitor from getting financing.
But, in Dahl’s case, it isn’t clear that she did anything independently illegal. Further, there are some cases that don’t require the wrongful act to be independently illegal. In fact, some courts have admitted hey protect the secure enjoyment of economic relations at the expense of a freely competitive economy. (Pacific Gas & Electric Co. v. Bear Sterns & Co. [1990] 50 Cal. 3d 1118, 1137.)
While the line between fair and foul might not always be clear, Dahl’s story should give pause not just to those contemplating interfering with someone’s inheritance, but also to those scheming to steal a customer from a competitor. It has to be fair. The problem, as it often is with the law, is the bounds of what’s “fair” is often in the eye of the beholder.
