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Popescu v. Apple Inc.

California Court of Appeals, Sixth District

July 1, 2016

DAN POPESCU, Plaintiff and Appellant,
v.
APPLE INC., Defendant and Respondent

          Superior Court of Santa Clara County, No. CV249279, Mark H. Pierce, Judge.

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         COUNSEL

         Richard D. Schramm and Amy Carlson for Plaintiff and Appellant.

         Todd K. BoyerLittler Mendelson,, Benjamin A. Emmert and Robert J. Wilger for Defendant and Respondent.

         Opinion by Má rquez, J., with Rushing, P. J., and Mihara, J., concurring.

          OPINION

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          MÁRQUEZ, J.

          [204 Cal.Rptr.3d 305] Plaintiff Dan Popescu sued Apple Inc. (Apple) for damages after he was fired by his employer, Constellium Rolled Products Ravenswood, LLC (Constellium). He alleged [204 Cal.Rptr.3d 306] that between August and October 2011, Apple took affirmative steps to convince Constellium to terminate him in retaliation for his resistance to Apple's alleged illegal anticompetitive conduct. The court sustained Apple's demurrer to Popescu's first amended complaint (Complaint) without leave to amend.

         This appeal involves Popescu's claim for intentional interference with contractual relations (contract interference) and his claim for intentional interference with prospective economic advantage (business interference). Claims for contract interference and business interference are separate but related torts. The elements of the two claims are substantially the same, but a plaintiff alleging business interference must also show that the defendant's action " was wrongful 'by some measure beyond the fact of the interference itself.' [Citation.]" ( Della Penna v. Toyota Motor Sales, U.S.A., Inc. (1995) 11 Cal.4th 376, 393 [45 Cal.Rptr.2d 436, 902 P.2d 740] ( Della Penna ).) As a general rule, this wrongfulness element is not required in a contract interference claim because contracts are entitled to greater protection from interference.

         Among the issues we will address in this appeal are whether (1) an employee (Popescu) whose at-will employment contract is terminated as a result of a third party's (Apple's) interference must allege that the defendant's conduct was independently wrongful to state a contract interference claim, and (2) a third party's alleged anticompetitive conduct may constitute independently wrongful acts to support a business interference claim, even if the plaintiff is not directly harmed by the wrongful acts.

          In our review of the sustaining of a demurrer, we must accept as true all material allegations of fact that are well pleaded in the complaint ( Blickman Turkus, LP v. MF Downtown Sunnyvale, LLC (2008) 162 Cal.App.4th 858, 866-867 [76 Cal.Rptr.3d 325]), regardless of how " improbable they may be. [Citation.]" ( Del E. Webb Corp. v. Structural Materials Co. (1981) 123 Cal.App.3d 593, 604 [176 Cal.Rptr. 824] ( Del E. Webb Corp. ).) Based upon this standard and the law applicable to contract and business interference claims, we conclude the trial court erred.

         In sustaining the demurrer to the contract interference claim, the trial court concluded that Popescu had alleged an at-will employment agreement with Constellium, and that under Reeves v. Hanlon (2004) 33 Cal.4th 1140 [17 Cal.Rptr.3d 289, 95 P.3d 513] ( Reeves ), Popescu could not state a contract

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interference claim as a matter of law. As to the business interference claim, the court held that Apple's alleged anticompetitive conduct did not constitute an independently wrongful act supporting Popescu's claim because it was not " designed to, and [did not] actually cause interference with the economic relationship" between Popescu and Constellium.

         We will conclude that the trial court correctly found that Popescu had alleged an at-will employment agreement. But the court then erroneously interpreted and applied Reeves as compelling the conclusion that Popescu " cannot state a claim for intentional interference with contract." Reeves, however, concerned a type of claim that is not at issue here--a claim by a former employer whose at-will employee was hired away by a new employer. Because of the dual policy concerns of employee mobility and the promotion of legitimate competition, the California Supreme Court held in Reeves that the former employer had to show that the new employer's conduct in recruiting and hiring its at-will employee was independently wrongful. ( Reeves, supra, 33 Cal.4th at pp. 1149-1153.) [204 Cal.Rptr.3d 307] Those same policy considerations do not exist here. This case involves an employee--not his former employer--suing a third party for interfering with his employment agreement. We thus hold that Reeves does not require Popescu to allege or prove as part of his contract interference claim that Apple's conduct in interfering with his at-will employment contract was independently wrongful.

         We also hold that Popescu alleged the required elements of a business interference claim. As part of that claim, Popescu was not required to allege that he was directly harmed by an independently wrongful act so long as he alleged (as he did) that Apple's wrongful act interfered with his economic relationship with Constellium.

         Because the demurrer to both causes of action should have been overruled, we need not address Popescu's contention that the trial court abused its discretion by denying leave to amend. We will reverse the judgment with directions that the court vacate its prior order and enter a new order overruling the demurrer to both causes of action.

         PROCEDURAL BACKGROUND

         I. Complaint

         On July 9, 2013, Popescu initiated this action against Apple, alleging contract interference and business interference claims. Apple filed a demurrer to the initial pleading. Apple's demurrer was not heard by the court because, in response to the demurrer, Popescu filed an amended pleading, the Complaint, that is at issue in this appeal.

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         Popescu, an Arizona resident, alleged[1] that he is " an aluminum engineering manager who developed cutting edge alloys for high-tech customers." The gist of his action is that he " objected to Apple's unlawful trade practices," and that Apple therefore " convinced [his] employer to terminate him for cause on a trumped up basis," thereby " blackball[ing] Popescu from his profession."

         In 2000, Popescu was working for Alcoa, Inc. (Alcoa). He was hired that year by Algroup Alusuisse (Algroup), an aluminum supplier that is Alcoa's largest competitor. Algroup hired Popescu because he had expertise " in marketing value-added aluminum substrates directly to end users in high-tech industries." Algroup and Popescu entered into an employment agreement, which included the following provision for Popescu's benefit: " 'An extended separation support package (as an exception to current policy) which would provide you with up to twelve months of base salary and medical/dental coverage through paid COBRA, as well as outplacement services, should your employment terminate for any reason other than misconduct or resignation.'" Algroup was acquired by Alcan Corporation (Alcan) in 2001.

         Popescu alleged that he was " a stellar and highly valued employee [who] survived a series of corporate transactions" that resulted in his employment by Constellium. In a June 2009 written employment agreement, Constellium reaffirmed Popescu's severance provision in his prior agreement with Algroup: " 'Algroup Severance Plan: Provisions of the Algroup severance, offered to you at the time of your employment with Algroup, will continue to be [204 Cal.Rptr.3d 308] honored, up to one year's severance pay while unemployed, COBRA benefits (if not eligible elsewhere), outplacement services and unused earned vacation.'"

         Popescu alleged that he received performance reviews from Alcan and Constellium that were " exemplary." His employer used a scoring system that rated him as " 'Very Successful' or 'Exceptional.'" During his last review in February 2011, Constellium designated Popescu as being in " the very highest 'Critical Resource' category." The next month, it designated him as the lead employee in pursuing a relationship with Apple in which it was looking " to expand the aluminum look and design of the MacBook and iPad to its iPhone. Popescu performed superbly."

         By early 2011, Apple had determined it would " replace the stainless steel iPhone body with a thinner and lighter extruded, anodized aluminum alloy."

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Apple approached Constellium to develop an alloy with " specifications [that] were very demanding and required state of the art expertise and technology." In March 2011, the business unit president of Constellium Global ATI (of which Constellium is a subdivision) designated Popescu to lead in the pursuit of a relationship with Apple in the latter's goal of using an aluminum alloy for its iPhone products. Popescu was designated the project lead because of his " expertise and performance."

         Popescu and a team of engineers from Constellium commenced work on the Apple custom alloy project. Between April and August 2011, Popescu oversaw the project, which involved Apple engineers and managers in California, Constellium's research and development center in France, and Constellium's Swiss-based manufacturing unit. Apple sought and obtained a large degree of information from Constellium, including its trade secrets regarding aluminum alloy manufacturing formulas and processes. Constellium, through Popescu, also gave Apple samples of its extruded custom alloy and other non-custom alloys.

         While development was progressing, Apple insisted that Constellium sign a " 'Development Agreement'" containing " restrictive terms," including provisions that (a) Apple was not obligated to purchase any developed products or to use Constellium as its supplier, and (b) Constellium, for an effective period of five years, " would [be] precluded ... from supplying alloy to any manufacturer of consumer electronics." Apple advised Constellium that Constellium's competitors (other elite aluminum alloy suppliers) had already signed such an agreement. Popescu objected to the agreement and refused to sign it on Constellium's behalf.

         Popescu alleged that he subsequently attended a meeting with Apple in Cupertino on August 30, 2011. The Apple engineers with whom Popescu had worked for months were silent, while their superiors, who were new to the project, led the meeting and " were visibly upset that the nearly complete custom alloy had outpaced the execution of the development agreement (Development Agreement)." Apple representatives insisted that Constellium sign the Development Agreement, which included an additional restrictive term that required Constellium to transfer its intellectual property interests in the custom aluminum alloy to Apple. Popescu again refused to sign the agreement on behalf of Constellium.

         Popescu alleged that Apple wanted to use the executed Development Agreement to restrict competition in the smartphone market. He alleged that by " lock[ing] up [the elite aluminum] suppliers with the [R]estrictive Development Agreement, Apple would be free to develop ... its own extruded alloy body for the iPhone 5," and to prevent its competitors from developing

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[204 Cal.Rptr.3d 309] a smartphone with a comparable aluminum alloy body. " Apple saw Popescu as an obstacle to the Development Agreement, so he was an obstacle to the larger scheme to restrict competition in smartphones."

         Popescu also alleged that, during the August 30 meeting, he had inadvertently activated the recording feature of his Livescribe Smartpen (the recording incident). Apple's attorney noticed that the meeting was being recorded, confiscated the Smartpen, and the meeting continued. After the meeting, Apple insisted that Constellium commence an investigation into the recording incident. Apple also requested that Constellium terminate Popescu, but his supervisors resisted. Apple then appealed to the executive management of the private equity firm that owned Constellium, after which Popescu was terminated for cause. Popescu alleged that Apple " used the recording incident to leverage both [his] termination and Constellium's execution of the Development Agreement." Apple's action allegedly prevented Popescu from obtaining other employment in the aluminum alloy industry. At the time he was terminated on October 28, 2011, Popescu earned more than $200,000 per year, and he intended to work at Constellium for at least 10 more years, until he retired.

         After Popescu was terminated, Constellium signed the Development Agreement. Constellium was " the last of the elite aluminum suppliers to sign the Development Agreement and, thus, the last supplier capable of producing an extruded alloy case equal or superior to Apple's extruded ... iPhone 5 case." Popescu alleged that as a result of his termination and Constellium's execution of the Development Agreement, Apple was able to misappropriate Constellium's aluminum alloy trade secrets. He alleged that the Development Agreements signed by Constellium and other elite aluminum suppliers--which agreements were " naked output contracts ... in which a firm bargains for another's entire output on the condition that the seller does not deal with the firm's rivals" --had anticompetitive effects in the global marketplace because " Apple's competitors [were] denied a potentially efficiency-increasing resource while the public [was] denied a ...


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