CLAUDIA WILKEN, District Judge.
Plaintiff and Counterclaim-Defendant Arthur J. Gallagher & Co. brought this action against its former employee, Defendant and Counterclaimant Christopher Lang, for breach of contract and various business-related torts. This Court granted in part and denied in part Lang's motions to dismiss the complaint and the subsequently-filed amended complaint. Lang then answered the amended complaint and filed a counterclaim asserting six causes of action. Gallagher moves to dismiss four of Lang's counterclaims. Lang opposes the motion. After considering the parties' submissions, the Court grants Gallagher's motion, dismisses
Lang asserts the following facts in his counterclaim.
Gallagher is an insurance brokerage firm with its principal place of business in Illinois. In September 2008, Lang and Gallagher entered into an employment agreement whereby Lang agreed to be employed as an insurance broker in Gallagher's San Francisco office. The employment agreement specified a term of employment from September 10, 2008 through August 31, 2011. On or about August 26, 2011, Lang confirmed with his supervisor, Douglas Bowring, that the employment agreement would no longer be in place after August 31, 2011, and that Lang's employment after that time would continue on an "at-will" basis. In January 2014, Lang informed Bowring that he was unhappy with Gallagher. Later that month Gallagher proposed that Lang purchase his book of business from Gallagher for 1.5 times its value, or about $1,500,000.00. On January 31, 2014, Lang tendered his resignation letter to James McFarlane, Chairman of the Western Region. Lang inquired as to how Gallagher would notify clients of Lang's departure; McFarlane instructed Lang not to contact any of the clients. Beginning January 31, 2014, Lang's clients began contacting him concerning his resignation. Some of these clients said they heard of Lang's resignation from Gallagher's employees. In a letter dated February 13, 2014, Gallagher communicated to Lang that it considered the employment agreement to be valid and in force.
On February 28, 2014, Gallagher filed a Complaint against Lang. Lang filed a motion to dismiss, which this Court granted in part and denied in part. Gallagher then filed an amended complaint. Again Lang filed a motion to dismiss and again the Court granted the motion in part and denied it in part. Gallagher now proceeds on three claims of breach of contract.
Lang's counterclaim asserts six causes of action: intentional interference with prospective economic advantage, negligent interference with prospective economic advantage, a violation of sections 17200
A complaint must contain a "short and plain statement of the claim showing that the pleader is entitled to relief." Fed. R. Civ. P. 8(a). On a motion under Rule 12(b)(6) for failure to state a claim, dismissal is appropriate only when the complaint does not give the defendant fair notice of a legally cognizable claim and the grounds on which it rests.
Gallagher moves to dismiss Lang's first two causes of action, negligent and intentional interference with prospective economic advantage, for two reasons: first that the causes of action are barred by California's litigation privilege and second that Lang fails to state a claim because he does not allege an independent wrong. The Court agrees with Gallagher and will, accordingly, grant its motion.
Gallagher first moves to dismiss these causes of action because they are barred by California's litigation privilege. Under California Civil Code section 47(b), communications made in or related to judicial proceedings cannot give rise to tort liability. The purpose of the so-called litigation privilege is "to afford litigants . . . the utmost freedom of access to the courts without fear of being harassed subsequently by derivative tort actions."
The threshold issue in determining whether the litigation privilege applies is whether the defendant's conduct was communicative, in which case the privilege bars suit, or non-communicative, in which case it does not.
In response to Gallagher's motion, Lang argues that his counterclaims are founded in Gallagher's conduct: interfering with Lang's business relationships and attempting to intimidate the clients into ceasing those relationships. Gallagher replies that the essence of Lang's claims is that Gallagher allegedly said something during its contacts with the clients, and that the conduct Lang alleges is really communication. As currently plead, Lang's counterclaims do not allege non-communicative conduct that falls outside of the litigation privilege.
First, Lang's counterclaims assert that Gallagher "contacted" his clients "for the purpose of intimidating" them to terminate their relationships with Lang.
Gallagher also moves to dismiss these causes of action on the ground that Lang fails to state a claim for relief. To state a claim for intentional interference with prospective economic advantage, a plaintiff must allege "`(1) an economic relationship between the plaintiff and some third party, with the probability of future economic benefit to the plaintiff; (2) the defendant's knowledge of the relationship; (3) intentional acts on the part of the defendant designed to disrupt the relationship; (4) actual disruption of the relationship; and (5) economic harm to the plaintiff proximately caused by the acts of the defendant.'"
In the paragraphs describing his first two causes of action, Lang alleges that Gallagher knew of the economic relationships between the clients and Lang; that Lang had a prospective economic advantage because of these relationships; that Gallagher contacted the clients and filed a lawsuit with the intent to disrupt the prospective economic advantage; that the relationships were disrupted; and that Lang was harmed by this disruption. These allegations satisfy some of the main elements articulated above. However, as Gallagher argues, the conduct Lang describes in the first two causes of action—contacting clients and filing a lawsuit—are not independently wrongful acts and Lang does not cite any legal authority upon which the Court could conclude otherwise. Instead, in response to Gallagher's argument, Lang cites subsequent paragraphs of his counterclaim, which allege causes of action predicated upon completely different conduct, namely the parties' execution of the employment agreement. Because of the counterclaim's disjointed and incongruous nature, it is difficult to tell exactly what conduct forms the bases of Lang's causes of action and thus the claims as currently written do not give Gallagher fair notice of the grounds on which the causes of action rest.
Lang's third cause of action proceeds under California's Unfair Competition Law, which prohibits "any unlawful, unfair or fraudulent business act or practice." Cal. Bus. & Prof. Code § 17200. Lang alleges that Gallagher violated the Unfair Competition Law by requiring Lang to execute the employment agreement in this case, which he alleges contains unreasonable, overbroad and unenforceable covenants not to compete and not to solicit the business of Gallagher's clients. Gallagher moves to dismiss Lang's third cause of action for two reasons: first that the cause of action is barred by California's litigation privilege and second that Lang fails to state a claim because he does not allege conduct that is independently unlawful, unfair or fraudulent.
First, in response to Gallagher's assertion of the litigation privilege, Lang argues that his cause of action asserts liability predicated on non-communicative acts of requiring Lang to execute the employment agreement and on Gallagher's vacillation on whether or not the employment agreement applied beyond August 31, 2011. However, as Gallagher persuasively argues in its reply, the injurious action Gallagher committed, if any, is not the mere requirement that Lang execute the employment agreement, but rather the filing of the lawsuit seeking to enforce the agreement. Lang's alleged injury makes this clear: the injury Lang articulates is loss of income, loss of business and loss of goodwill, all injuries Lang would suffer if the allegedly anti-competitive provisions of the agreement were enforced, but which Lang did not suffer due to merely signing the agreement.
The California Court of Appeal illustrated this reasoning in
Lang's fourth cause of action alleges that Gallagher represented that the employment agreement was not in force, that Lang relied on that representation and that Gallagher then filed suit to enforce the employment agreement. Lang asserts that these actions restrained Lang from practicing his profession. Gallagher seeks dismissal of this cause of action as barred by the litigation privilege because the basis of the cause of action is Gallagher's lawsuit to enforce the employment agreement. The Court can only agree, based on the same logic as explained in section B, above. Accordingly, Gallagher is entitled to dismissal of this cause of action. The Court grants Lang leave to amend but only if he can plead an act restraining his trade that is not barred by the litigation privilege.
Lang's fifth cause of action alleges that the employment agreement contains provisions that restrained trade and prevented Lang from engaging in his lawful profession. Although Gallagher's motion to dismiss does not seek dismissal of this cause of action, the Court finds it prudent to dismiss it
The Court thus dismisses causes of action one through five of Lang's counterclaim. The Court also grants Lang leave to file an amended counterclaim within fourteen days of the date of this Order. Though Lang's sixth cause of action survives after this Order granting Gallagher's motion to dismiss, the Court reminds Lang of this District's Civil Local Rule 10-1, Amended Pleadings, which mandates that amended pleadings stand alone and may not incorporate any part of a prior pleading by reference.
For the reasons set forth above, Gallagher's motion to dismiss (Docket No. 38) is GRANTED. Causes of action one through five of Lang's counterclaim are dismissed. The Court grants Lang leave to amend, and grants Lang fourteen days from the date of this Order to file an amended counterclaim, consistent with this Order. A case management conference will be held in this case at 2:00 PM on Wednesday, February 25, 2015. The parties shall submit a joint case management statement by February 18, 2015.
IT IS SO ORDERED.