Case Title: Roy Allan Slurry Seal, Inc. v. American Asphalt South, Inc.

Citation: 

Docket Number: S225398

State: california

Court: California Supreme Court

Date: 2017-02-16T00:00:00Z

Document:
1 
Filed 2/16/17 
 
 
 
IN THE SUPREME COURT OF CALIFORNIA 
 
 
 
ROY ALLAN SLURRY SEAL, INC., et al., ) 
 
 
) 
 
Plaintiffs and Appellants, 
) 
 
 
) 
S225398 
 
v. 
) 
 
 
) 
Ct.App. 2/8 B255558 
AMERICAN ASPHALT SOUTH, INC., 
) 
 
) 
Riverside County 
 
Defendant and Respondent. 
) 
Super. Ct. No. RIC1308832 
 
____________________________________) 
 
To prove the tort of intentional interference with prospective economic 
advantage, a 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 (Korea Supply).)  Here we decide whether such a relationship exists 
between a bidder for a public works contract and the public entity soliciting bids.  
Plaintiffs alleged that they had submitted the second lowest bids on several 
contracts awarded to defendant, and that their bids would have been accepted but 
for defendant‟s wrongful conduct during the bidding process.  A divided Court of 
Appeal panel found these allegations sufficient.  We reverse.  Public works 
contracts are a unique species of commercial dealings.  In the contracts at issue 
here, the public entities retained broad discretion to reject all bids.  The bids were 
sealed, and there were no postsubmission negotiations.  In awarding the contracts, 
the public entities could give no preference to any bidder based on past dealings, 
 
2 
and were required to accept the lowest responsible bid.  In these highly regulated 
circumstances, plaintiffs had “at most a hope for an economic relationship and a 
desire for future benefit.”  (Blank v. Kirwan (1985) 39 Cal.3d 311, 331 (Blank).)  
Accordingly, plaintiffs‟ allegations were insufficient; the demurrer was properly 
sustained.              
I.  BACKGROUND 
Between 2009 and 2012 defendant American Asphalt South, Inc. 
(American) outbid the plaintiffs, Roy Allan Slurry Seal, Inc. (Allan) and Doug 
Martin Contracting, Inc. (Martin) on 23 public works contracts to apply a slurry 
seal coating on various roadways in Los Angeles, San Bernardino, Riverside, 
Orange, and San Diego Counties. The total value of the contracts exceeded $14 
million.  In 2013, Allan and Martin jointly sued American in all five counties for 
intentional interference with prospective economic advantage (hereafter 
sometimes referred to as tortious interference).1  Only the Riverside tort action is 
at issue here.  
The Riverside complaint alleged that American won six public works 
contracts2 on which either Allan or Martin was the second lowest bidder.  
American‟s underbids ranged from $3,842 to $140,794.  The complaint described 
the dates and amounts of American‟s bids, but did not include copies of the bids 
themselves.  The actual bids appear nowhere in the appellate record.  
                                              
1 
Plaintiffs also alleged predatory pricing under the Unfair Practices Act 
(Bus. & Prof. Code, §§ 17000, 17043) and sought an injunction against 
American‟s bidding practices under the unfair competition law (Bus. & Prof. 
Code, § 17200).  The trial court sustained demurrers to those causes of action, and 
the Court of Appeal affirmed.  Those holdings are not before us.       
2  
The contracting entities included four cities and the County of Riverside.  
For simplicity, we refer to these contracts collectively as the Riverside contracts.   
 
3 
To support their theory of tortious interference, plaintiffs alleged as 
follows.  Together, plaintiffs had 60 years of experience handling public works 
projects for slurry seal repair and maintenance.  The cost of materials for these 
projects is essentially the same for all contractors.  American engaged in wrongful, 
fraudulent, and illegal conduct by submitting deflated bids because it failed to pay 
prevailing wage and overtime compensation in connection with the named 
contracts, and with other public works contracts during the same period.  Plaintiffs 
alleged they had both a relationship with the contracting public entities and a 
reasonable probability of future economic benefit, because they “were the 
respective second lowest bidder[s] and would have been awarded the contract[s] 
but for the fraudulent and/or illegal conduct of [American] . . . .”  According to the 
complaint, “[American]‟s bid would have been rejected if [American]‟s conduct in 
failing to pay its employees properly was made known to the [public entity,] 
and/or [American] would not have been able to submit a lower bid . . . if 
[American] was properly paying all of its employees the prevailing wages . . . .”  
Plaintiffs alleged that the failure to secure the Riverside contracts resulted in 
estimated lost profits of $168,511 for Allan and $269,830 for Martin. 
The trial court sustained American‟s demurrer to the entire cause of action 
without leave to amend.  On appeal, the appellate court majority reversed as to the 
tortious interference claim, concluding that plaintiffs‟ pleading was adequate:  
“Plaintiffs here alleged that as the second lowest bidders they would have been 
awarded the contracts but for American‟s interference.  Implicit in this is the 
allegation that the various public entities were required to award the contract to the 
lowest responsible bidder and that plaintiffs satisfied all the requirements 
necessary to qualify for those contracts.  Although plaintiffs here did not submit 
the lowest bids, that was alleged to be due solely to American‟s violation of its 
statutory obligation to pay its workers the prevailing wage.  As in Korea Supply, 
 
4 
absent that alleged misconduct it was plaintiffs who in fact submitted the true and 
lawful lowest bids.”  The majority concluded that, although a public entity retains 
discretion to reject all bids submitted in response to its solicitation, “an actionable 
economic expectancy arises once the public agency awards a contract to an 
unlawful bidder, thereby signaling that the contract would have gone to the second 
lowest qualifying bidder.”   
The dissent urged to the contrary that plaintiffs failed to allege the existence 
of an economic relationship with the soliciting public entities.  The dissent 
reasoned that the tort was meant to guard against interference with existing 
relationships.  “[I]n the context of public works contracts, it is not possible for 
such a relationship to exist between the bidder and the public entity soliciting bids 
because public contract law forbids it.”  Moreover, “[i]t is antithetical to the 
principles of competitive bidding on public works projects that any bidder may 
expect probable future economic benefit . . . .”  Because the award of a 
government contract is highly discretionary, “none of the bidders has a 
„probability‟ of future economic benefit from the contract on which it is bidding.”  
The dissent pointed out that timing is important.  The relationship interfered with 
must be in existence when defendant‟s allegedly wrongful conduct took place.  In 
the dissent‟s view, the majority went astray by relying on plaintiffs‟ subsequently 
discovered placement as the second-lowest bidder to posit a relationship that did 
not, and could not, have existed during the bidding process.     
II.  DISCUSSION 
A demurrer is properly sustained when “[t]he pleading does not state facts 
sufficient to constitute a cause of action.”  (Code Civ. Proc., § 430.10, subd. (e).)  
On appeal, a resulting judgment of dismissal is reviewed independently.  (McCall 
v. PacifiCare of Cal., Inc. (2001) 25 Cal.4th 412, 415.)  “ „ “[W]e accept as true all 
the material allegations of the complaint” ‟ ” (Korea Supply, supra, 29 Cal.4th at 
 
5 
p. 1141), but do not “assume the truth of contentions, deductions or conclusions of 
law” (Aubry v. Tri-City Hospital Dist. (1992) 2 Cal.4th 962, 967).   
Intentional interference with prospective economic advantage has five 
elements:  (1) the existence, between the plaintiff and some third party, of an 
economic relationship that contains the probability of future economic benefit to 
the plaintiff; (2) the defendant‟s knowledge of the relationship; (3) intentionally 
wrongful acts designed to disrupt the relationship; (4) actual disruption of the 
relationship; and (5) economic harm proximately caused by the defendant‟s action.  
(Korea Supply, supra, 29 Cal.4th at pp. 1164-1165.) 
Here we focus on the first element, and consider a question of first 
impression.  Can a disappointed bidder on a public works contract demonstrate the 
requisite economic relationship with the public entity?  The first element 
(hereafter the economic relationship element) has two parts:  (1) an existing 
economic relationship that (2) contains the probability of an economic benefit to 
the plaintiff.   
American argues that merely submitting a bid to a public entity does not 
create an existing relationship but rather the hope of one.  It emphasizes that each 
bidder is considered a stranger to the public entity because the entity is prohibited 
from favoring bidders with whom it has had past dealings.  Additionally, public 
entities have discretion to reject all of the bids submitted.  Under these 
circumstances, American contends, there is no existing relationship with which to 
interfere and no reasonable probability that a benefit will be conferred by the 
awarding of a contract.   
Plaintiffs counter that their act of submitting what would have been the 
lowest responsible bid but for American‟s wrongful interference in the bidding 
process demonstrates the existence of an economic relationship with the 
probability of future economic benefit.  They rely on two facts.  First, the public 
 
6 
entities were required to award the contracts to the lowest responsible bidder.  
Second, in each instance the entities actually awarded a contract rather than 
rejecting all bids.  Accordingly, plaintiffs contend, their expectation was not 
unduly speculative.  Defendant has the better argument.   
Plaintiffs rely heavily on Korea Supply, supra, 29 Cal.4th 1134, but that 
case is distinguishable.  There, the companies MacDonald Dettwiler and Lockheed 
Martin submitted bids to the Republic of Korea to provide military equipment.  
The plaintiff, Korea Supply, was a broker who represented MacDonald Dettwiler 
during the bidding process.  The contract was awarded to Lockheed Martin after 
its agent allegedly bribed Korean officials.  (Id. at pp. 1141-1142.)  Korea Supply 
dealt primarily with the intent element of the tort.  However, it also held that the 
economic relationship element had been adequately pled.  (Id. at p. 1164.)  The 
plaintiff‟s agreement with MacDonald Dettwiler fixed its commission at 15 
percent of the contract price.  The plaintiff would have been entitled to a $30 
million commission had MacDonald Dettwiler won the contract.  The economic 
relationship allegedly interfered with was not a relationship between the broker 
and the Republic of Korea, the soliciting entity.  Instead, the relationship was that 
between the broker and MacDonald Dettwiler.  That relationship was an existing 
one that arose before the bidding process began.  (Id. at pp. 1141, 1164.)  Under 
the agreement, the broker had a reasonable expectation that it would receive its 
defined future economic benefit but for Lockheed‟s alleged interference.  Thus, 
the business relationship and corresponding expectancy was sufficiently alleged.  
(Id. at p. 1164.)   
Plaintiffs argue that Korea Supply is quintessentially a case about losing 
bidders and that plaintiffs have an even stronger claim here because “Korea 
Supply Company was once removed from the bidding process and its stake in the 
matter was completely dependent upon the fortunes of MacDonald Dettwiler.”  
 
7 
Significantly, however, there is no indication that the bidding process between 
MacDonald Dettwiler and the Republic of Korea, upon which the broker‟s 
commission depended, was constrained in a manner similar to the statutory rules 
that govern California public works contracts.  As explained below, the public 
works bidding process differs significantly from the commercial transactions that 
traditionally formed the basis for tort liability.  Korea Supply does not stand for 
the proposition that a public contract bidder has an existing relationship with the 
entity soliciting the bid.   
Buckaloo v. Johnson (1975) 14 Cal.3d 815 (Buckaloo) is another case in 
which the economic relationship element was adequately pled.3  That case 
involved a tortious interference claim in the real estate brokerage context.  A 
property owner posted an “ „open listing‟ ” soliciting local brokers to identify 
buyers for her property.  (Buckaloo, at p. 820.)  Plaintiff Buckaloo told a 
prospective buyer about the property and informed the seller that he was the 
“ „procuring cause‟ ” of that buyer.  (Ibid.)  The buyer ultimately purchased the 
property without Buckaloo‟s participation.  (Id. at pp. 820-821.)  When he 
requested his commission, the seller refused to pay.  Buckaloo sued the seller, the 
buyer, and others involved in the transaction; a demurrer was sustained as to all 
defendants but the seller.  (Id. at p. 821.)   
Buckaloo held the tort had been adequately pled even though the open 
listing was not a contract enforceable against the seller because of the statute of 
                                              
3  
Buckaloo was disapproved in part in Della Penna v. Toyota Motor Sales, 
U.S.A., Inc. (1995) 11 Cal.4th 376, 393, footnote 5 (Della Penna).  The 
disapproved aspect of Buckaloo‟s holding involved the “wrongful” act element of 
the tort (Della Penna, at p. 393), which is not at issue here. 
 
8 
frauds.4  (Buckaloo, supra, 14 Cal.3d at pp. 821-822.)  As Buckaloo explained, 
“the mere fact that a prospective economic relationship has not attained the dignity 
of a legally enforceable agreement does not permit third parties to interfere with 
performance.”  (Id. at p. 827.)  The plaintiff had pled a “prospective contractual 
relationship” because the seller posted an open listing offering to pay brokers a 
commission.  Plaintiff reasonably understood this action to constitute an invitation 
to find a buyer.  (Id. at p. 828.)  The plaintiff alleged he had “completed the 
unilateral, albeit unenforceable, contract” with the seller by providing the 
necessary buyer.  (Id. at p. 829.)  The seller‟s posting of an open listing and the 
offer of a commission, on which Buckaloo relied in procuring a buyer, was 
sufficient to demonstrate an existing economic relationship between Buckaloo and 
the seller.  The complaint further alleged tortious interference:  the buyer knew of 
the seller‟s promise to pay, and intentionally interfered with the prospective 
commission by approaching the seller directly and inducing her to sell the property 
while intentionally excluding Buckaloo‟s participation.  (Ibid.)5         
                                              
4  
Civil Code section 1624, subdivision (a)(4) (formerly subd. 5) requires a 
writing subscribed by the party to be charged for “[a]n agreement authorizing or 
employing an agent, broker, or any other person to purchase or sell real estate, . . . 
or to procure, introduce, or find a purchaser or seller of real estate . . . for 
compensation or a commission.”    
5  
Citing Buckaloo, the Court of Appeal in Settimo Associates v. Environ 
Systems, Inc. (1993) 14 Cal.App.4th 842 (Settimo) described the economic 
relationship element as requiring “the existence of a prospective business 
relationship containing the probability of future economic rewards for plaintiff.”  
(Id. at p. 845, italics added.)  Plaintiffs attribute significance to Settimo‟s use of the 
word “prospective.”  However, the court did not address the first element of the 
tort.  It held that the plaintiff had failed to state a cause of action because the 
winning bidder‟s lack of a general contracting license to perform some of the work 
called for by the contracts “does not amount to actionable unlawful interference 
with contracts.”  (Id. at p. 846.)  Settimo offers no guidance regarding the 
economic relationship element.     
 
9 
By contrast, a cause of action for tortious interference has been found 
lacking when either the economic relationship with a third party is too attenuated 
or the probability of economic benefit too speculative.  In Blank, supra, 39 Cal.3d 
311, the plaintiff alleged that the defendant had interfered with his application for 
a city license to operate a poker club.  Blank held the plaintiff‟s pleading failed to 
satisfy the economic relationship element.  “First, „[t]he relationship between 
[plaintiff] and the City cannot be characterized as an economic relationship.  It 
was [plaintiff‟s] relationship to a class of as yet unknown [patrons] which was the 
prospective business relationship.‟ [Citation.]”  (Id. at p. 330.)  “Second, even if 
the relationship between the plaintiff and the city could be so characterized, it 
would make little difference.  The tort has traditionally protected the expectancies 
involved in ordinary commercial dealings—not the „expectancies,‟ whatever they 
may be, involved in the governmental licensing process.”  (Ibid.)  Third, the city 
council‟s discretion to grant or deny a poker club license application was “so 
broad as to negate the existence of the requisite „expectancy‟ as a matter of law.  
Thus, „no facts are alleged . . . showing that the plaintiff had any reasonable 
expectation of economic advantage which would otherwise have accrued to 
him . . . .‟ [Citation.]”  (Ibid.) 
Youst v. Longo (1987) 43 Cal.3d 64 (Youst), held that the outcome of a 
sporting contest involving harness horseracing was too speculative to support a 
tortious interference claim.  (Id. at p. 74.)  The plaintiff alleged that the defendant 
had driven his horse into the path of the plaintiff‟s horse during a race and had 
struck plaintiff‟s horse with a whip, causing it to break stride and finish in sixth 
place.  The plaintiff sought damages based on the purse for first, second, or third 
place, with the ultimate placement to be determined by the jury, along with 
punitive damages.  (Id. at p. 68.)  The trial court sustained defendant‟s demurrer 
without leave to amend.  Youst affirmed, observing:  “the true source of the 
 
10 
modern law on interference with prospective relations is the principle that tort 
liability exists for interference with existing contractual relations.  [Citation.]  „For 
the most part the “expectancies” thus protected have been those of future 
contractual relations . . . .  In such cases there is a background of business 
experience on the basis of which it is possible to estimate with some fair amount of 
success both the value of what has been lost and the likelihood that the plaintiff 
would have received it if the defendant had not interfered.‟ ”  (Id. at p. 75, quoting 
Prosser & Keeton, Torts (5th ed. 1984) § 130, p. 1006, italics added by Youst.)  By 
contrast, the tort “traditionally has not protected speculative expectancies such as 
the particular outcome of a contest.”  (Youst, at pp. 74-75.)  The defendant‟s 
demurrer was therefore properly sustained because “[d]etermining the probable 
expectancy of winning a sporting contest but for the defendant‟s interference 
seems impossible in most if not all cases, including the instant case.”  (Id. at p. 75, 
italics omitted.)     
In Westside Center Associates v. Safeway Stores 23, Inc. (1996) 42 
Cal.App.4th 507 (Westside Center), the Court of Appeal interpreted our holdings 
in Youst and Blank to require proof that the defendant had disrupted a particular 
relationship with a known third party.  There, the plaintiff purchased a shopping 
center containing several small stores.  An “anchor” building in the center was 
separately owned and leased to Safeway.  Safeway vacated the premises, but 
executed an option to renew its lease for five years.  Business at the rest of the 
center suffered while the anchor premises stood vacant, and the plaintiff ultimately 
sold its property interest at a claimed loss of more than $2 million.  (Id. at pp. 510-
515.)  The plaintiff sued Safeway for tortious interference with prospective 
economic advantage, alleging that Safeway interfered, not with a particular sale, 
but with the relationship between plaintiff and the class of all potential buyers for 
the property, thereby reducing its market value.  (Id. at p. 523.)  The Court of 
 
11 
Appeal upheld the trial court‟s dismissal of the claim.6  It reasoned that an 
“ „interference with the market‟ ” or “ „lost opportunity‟ ” claim (Westside Center, 
at p. 527) was unduly speculative:  “It assumes what normally must be proved, 
i.e., that it is reasonably probable the plaintiff would have received the expected 
benefit had it not been for the defendant‟s interference.”  (Id. at p. 523.)  
Emphasizing the requirement of an existing relationship, the court held that the 
tort “protects the expectation that the relationship eventually will yield the desired 
benefit, not necessarily the more speculative expectation that a potentially 
beneficial relationship will eventually arise.”  (Id. at p. 524.)  The court concluded 
that the plaintiff‟s theory “fails to provide any factual basis upon which to 
determine whether the plaintiff was likely to have actually received the expected 
benefit.  Without an existing relationship with an identifiable buyer, [plaintiff]‟s 
expectation of a future sale was „at most a hope for an economic relationship and a 
desire for future benefit.‟ ”  (Id. at p. 527, quoting Blank, supra, 39 Cal.3d at p. 
331.)     
These authorities counsel against recognizing an “economic relationship” 
containing the “probability of future economic benefit” (Korea Supply, supra, 29 
Cal.4th at p. 1164), solely because plaintiffs submitted a bid in response to a 
public entity‟s solicitation.  First, as the dissent below observed, there could be no 
existing relationship between plaintiffs and the public entities soliciting bids 
“because public contract law forbids it.”  The various public entities named in the 
Riverside County action were required by statute to award these contracts to the 
lowest responsible bidder.  (See Pub. Contract Code, §§ 20162 [city contracts], 
                                              
6  
The dismissal occurred, not on demurrer, but instead after questions of law 
and stipulated facts were presented to the trial court in pretrial proceedings.  
(Westside Center, supra, 42 Cal.App.4th at p. 510.) 
 
12 
20128 [county contracts], 10122 [state contracts].)  The purpose of this 
requirement is to “ „guard against favoritism, improvidence, extravagance, fraud 
and corruption . . . .‟ ”  (Domar Electric, Inc. v. City of Los Angeles (1994) 9 
Cal.4th 161, 173 (Domar Electric); accord, Pub. Contract Code, § 100.)  Under the 
law, each bidder must be treated as a stranger to the entity.  Thus, unlike Korea 
Supply, where the plaintiff had an ongoing agency relationship with the losing 
bidder, no past or ongoing dealings could affect the award of these public 
contracts.  The entities were required to award the contract to the lowest 
responsible bidder, or not at all.   
Second, plaintiffs “ha[ve] pleaded and can plead no protectible 
„expectancy.‟ ”  (Blank, supra, 39 Cal.3d at p. 331.)  A public entity‟s solicitation 
for bids is merely a request for offers from interested parties.  It encourages 
multiple parties to compete for the contract.  (Domar Electric, supra, 9 Cal.4th at 
p. 173; Konica Business Machines U.S.A., Inc. v. Regents of the University of 
California (1988) 206 Cal.App.3d 449, 456.)  Here, the bidding was sealed, and 
no negotiations took place.  (See Pub. Contract Code, §§ 20170 [city contracts], 
20129, subd. (a) [county contracts], 10167 [state contracts].)  Ultimately, the 
public entities had broad discretion to reject all bids.  (Universal By-Products, Inc. 
v. City of Modesto (1974) 43 Cal.App.3d 145, 152; Pub. Contract Code, §§ 20166 
[city contracts], 20150.9 [county contracts], 10185 [state contracts].)  Just as the 
city‟s discretion to grant or deny a poker club license defeated the plaintiff‟s 
expectancy in Blank, here too, plaintiffs had “at most a hope for an economic 
relationship and a desire for future benefit.”  (Blank, supra, 39 Cal.3d at p. 331.)   
In reaching a contrary conclusion, the Court of Appeal majority reasoned 
that “an actionable economic expectancy arises once the public agency awards a 
contract to an unlawful bidder, thereby signaling that the contract would have 
gone to the second lowest qualifying bidder.”  (Italics added.)  The court found 
 
13 
“implicit” in plaintiffs‟ allegations “that plaintiffs satisfied all the requirements 
necessary to qualify for those contracts.”  It further concluded that, “[a]lthough 
plaintiffs here did not submit the lowest bids, that was alleged to be due solely to 
American‟s violation of its statutory obligation to pay its workers the prevailing 
wage.”  It observed that “[w]hether a plaintiff was in fact the second lowest bidder 
and would have been awarded a contract had the winning bidder complied with 
the prevailing wage law is a factual issue susceptible to standard civil discovery 
practices and is amenable to proof at trial.”   
The majority‟s analysis puts the cart before the horse.  The case law 
recognizes that “the interference tort applies to interference with existing 
noncontractual relations which hold the promise of future economic advantage.”  
(Westside Center, supra, 42 Cal.App.4th at p. 524, citing Blank, supra, 39 Cal.3d 
311 and Youst, supra, 43 Cal.3d 64.)  The tort‟s requirements “presuppose the 
relationship existed at the time of the defendant‟s allegedly tortious acts lest 
liability be imposed for actually and intentionally disrupting a relationship which 
has yet to arise.”  (Westside Center, at p. 526, italics added.)  As the dissent 
observed, “the plaintiff‟s „expectancy‟ must necessarily precede the interfering 
conduct.”  (See, e.g., Sole Energy Co. v. Petrominerals Corp. (2005) 128 
Cal.App.4th 212, 243.)  Here, when American allegedly submitted illegally 
deflated bids, plaintiffs were only one of several bidders on these public works 
contracts.  No one knew if plaintiffs would be the lowest bidder, and the public 
entities had not yet decided whether or not to award the contracts.  Plaintiffs 
cannot rely on the outcome of later events to prove that American interfered with 
an existing economic relationship.  
The majority‟s probable benefit analysis is also speculative.  The tort of 
intentional interference with prospective economic advantage “traditionally has 
not protected speculative expectancies”  (Youst, supra, 43 Cal.3d at pp. 74-75), 
 
14 
usually because “ „there is no sufficient degree of certainty that the plaintiff ever 
would have received the anticipated benefits‟ ” (id. at p. 74, quoting Prosser & 
Keeton, Torts, supra, § 130, p. 1006, italics added by Youst.)  Accordingly, “[w]e 
have been cautious in defining the interference torts, to avoid promoting 
speculative claims.”  (Pacific Gas & Electric Co. v. Bear Sterns & Co. (1990) 50 
Cal.3d 1118, 1136-1137.)  Buckaloo, supra, 14 Cal.3d 815, stated that the tort lies 
“ „when a contract would, with certainty, have been consummated but for the 
conduct of the tortfeasor . . . .‟ ”  (Id. at p. 823, fn. 6, quoting Builders 
Corporation of America v. U.S. (N.D.Cal. 1957) 148 F.Supp. 482, 484, fn. 1.)  
Youst stated a slightly lower threshold:  California authority “requir[es] at least the 
reasonable probability of an expectancy to establish a cause of action for 
interference with prospective economic advantage . . . .”  (Youst, at pp. 71-72; 
accord, Korea Supply, supra, 29 Cal.4th at p. 1164 [plaintiff must “demonstrate an 
economic relationship with a probable future economic benefit”].)  Youst 
emphasized that this requirement “is especially appropriate to evaluate a lost 
economic expectancy where the facts involve a competitive contest of one kind or 
another.  To require less of a showing would open the proverbial floodgates to a 
surge of litigation based on alleged missed opportunities to win various types of 
contests, despite the speculative outcome of many of them.”  (Youst, at p. 74.)  
We have previously noted, in a different context, the inherently speculative 
nature of public works bidding.  (Kajima/Ray Wilson v. Los Angeles County 
Metropolitan Transportation Authority (2000) 23 Cal.4th 305, 315-316 (Kajima).)  
In denying recovery against a government entity for lost profits under a 
promissory estoppel theory, Kajima stated:  “Because the [public entity] was 
authorized to reject all bids, [the plaintiff] did not know at [the time its bid was 
submitted] whether the contract would even be awarded.  Nor, because of the 
secrecy of the bidding process, did [the plaintiff] know whether it was indeed the 
 
15 
lowest responsible bidder.  Therefore, given these uncertainties which are inherent 
in competitive bidding, bid preparation costs, not lost profits, were the only costs 
reasonably incurred.”  (Ibid.)    
Plaintiffs‟ allegations of tortious interference likewise hinge on a high 
degree of uncertainty.  Contrary to the majority‟s reasoning below, the award of 
contracts to American does not “signal[] that the contract would have gone to the 
second lowest qualifying bidder.”  As amicus curiae League of California Cities 
observes, even if a public entity accepts the lowest bid, it retains discretion to 
reject all remaining bids if the contract is not consummated with the low bidder.  
(See Pub. Contract Code, § 20174 [“[t]he city council may, on refusal or failure of 
the successful bidder to execute the contract, award it to the next lowest 
responsible bidder” (italics added)].)  Notably, in at least two of the contracts at 
issue here, American underbid plaintiffs by over $100,000.  The public entities‟ 
discretion to reject remaining bids would necessarily take into account the 
difference between the bid amounts of the lowest and second lowest bidders.   
Additionally, to be awarded the contracts, plaintiffs were required to meet 
the criteria for responsible bidders and responsive bids.  (Pub. Contract Code, § 
1103 [defining responsible bidder]; MCM Construction, Inc. v. City and County of 
San Francisco (1998) 66 Cal.App.4th 359, 368 (MCM Construction) [defining 
responsive bid].)  Determining whether a certain bidder is “responsible” generally 
entails an evaluation of the bidder‟s trustworthiness, quality, fitness, capacity, and 
experience to satisfactorily perform the contract in question.  (Pub. Contract Code, 
§ 1103; City of Inglewood-L.A. County Civic Center Auth. v. Superior Court 
(1972) 7 Cal.3d 861, 867.)  It “is a complex matter dependent, often, on 
information received outside the bidding process and requiring, in many cases, an 
application of subtle judgment.”  (Taylor Bus Service, Inc. v. San Diego Bd. of 
Education (1987) 195 Cal.App.3d 1331, 1341-1342.)  Given “the complex and 
 
16 
external nature of a determination of nonresponsibility” (id. at p. 1342), it is 
speculative for plaintiffs to allege, as a basis for the economic relationship, that 
they “were the respective second lowest bidder and would have been awarded the 
contract” if not for American‟s illegal conduct.     
For these reasons, the public works bidding process differs from the types 
of commercial transactions that traditionally have formed the basis for tort 
liability.  In ordinary commercial transactions, “ „there is a background of business 
experience on the basis of which it is possible to estimate with some fair amount of 
success both the value of what has been lost and the likelihood that the plaintiff 
would have received it if the defendant had not interfered.‟ ”  (Youst, supra, 43 
Cal.3d at p. 75, quoting Prosser & Keeton, Torts, supra, § 130, at p. 1006, italics 
added by Youst.)  By contrast, in these public works contracts, the bidding was 
sealed, there were no negotiations, all qualified contractors were on equal footing 
regardless of past contractual dealings, the public entities were required to 
determine the bidder‟s responsibility, and they retained discretion to reject all bids.  
These circumstances counsel against extending a tortious interference claim to the 
bid process for these public works contracts.   
Additionally, we must consider whether expanding tort liability in the area 
of public works contracts “would ultimately create social benefits exceeding those 
created by existing remedies for such conduct, and outweighing any costs and 
burdens it would impose.”  (Cedars-Sinai Medical Center v. Superior Court 
(1998) 18 Cal.4th 1, 8.)  Courts must act prudently when fashioning damages 
remedies “in an area of law governed by an extensive statutory scheme.”  (Kajima, 
supra, 23 Cal.4th at p. 317.)  In California, public contract bidding is largely 
governed by statute.  (Id. at p. 313.)  As noted, the public entity is required to 
determine whether a bidder is responsible and the bid is responsive.  (Pub. 
Contract Code, § 1103; MCM Construction, supra, 66 Cal.App.4th at p. 368.)  
 
17 
Competing bidders may challenge the award of a contract to an irresponsible 
bidder by a writ of mandate for injunctive relief.  (Kajima, at p. 313, fn. 1; DeSilva 
Gates Construction, LP v. Department of Transportation (2015) 242 Cal.App.4th 
1409, 1421; Monterey Mechanical Co. v. Sacramento Regional County Sanitation 
Dist. (1996) 44 Cal.App.4th 1391, 1414; Code Civ. Proc., § 1085.)   
Plaintiffs argue that their lawsuits will protect employees on public works 
projects by uncovering and deterring wage law violations.  The argument fails for 
two reasons.  First, the area is already extensively regulated.  (See Lab. Code, §§ 
1726, 1727, 1741, 1773.2, 1775, 1776.)  Prevailing wages are required by statute 
to be paid on all public works contracts.  (Lab. Code, § 1771; Alameda County 
Joint Apprenticeship & Training Committee v. Roadway Electrical Works Inc. 
(2010) 186 Cal.App.4th 185, 190.)  Several statutory mechanisms exist to enforce 
that duty.  A public entity may withhold payments to a contractor who violates the 
prevailing wage laws.  (Lab. Code, §§ 1726, subds. (a), (b), 1727.)  The Division 
of Labor Standards Enforcement may recover wages, interest, and damages on 
behalf of employees through an administrative hearing process and a civil action.  
(Lab. Code, §§ 1741, 1775; Lusardi Construction Co. v. Aubry (1992) 1 Cal.4th 
976, 986.)  The affected employees also possess private rights of action arising 
from statute and contract.  (Road Sprinkler Fitters Local Union No. 669 v. G & G 
Fire Sprinklers, Inc. (2002) 102 Cal.App.4th 765, 774 & fn. 13.)  Notably, none of 
these statutory schemes contemplates damage awards to a disappointed public 
works bidder who alleges the winning bid was based on prevailing wage 
violations.7   
                                              
7  
In 1991 the Legislature enacted Public Contract Code sections 19102 and 
20104.70.  Those sections authorize the second lowest public contract bidder and 
others to sue a successful bidder for damages upon proof that the contract was 
 
(footnote continued on next page) 
 
18 
Second, the competitive bidding laws were enacted for the benefit of the 
public, “ ‘ “not for the benefit or enrichment of bidders, and should be so 
construed and administered as to accomplish such purpose fairly and reasonably 
with sole reference to the public interest.” ’ ”  (Kajima, supra, 23 Cal.4th at 
pp. 316-317.)  “The duties created by the wage-and-hour statutes run solely from 
employer to employee.”  (Castillo v. Toll Bros., Inc. (2011) 197 Cal.App.4th 1172, 
1210.)  They “do not create any action for civil damages in a competing bidder.”  
(Settimo, supra, 14 Cal.App.4th at p. 846.) 
Expanding tort liability to cover wrongful interference with the public 
contracts bid process would provide little additional benefit in light of the 
extensive statutory scheme.  Conversely, an expansion has potentially significant 
public policy disadvantages.  (See Youst, supra, 43 Cal.3d at pp. 77-78.)  The 
possibility of significant monetary gain may encourage frivolous litigation by 
second lowest bidders “ „for effort they did not make and risks they did not 
take.‟ ”  (Kajima, supra, 23 Cal.4th at p. 317, quoting City of Atlanta v. J.A. Jones 
Const. Co. (Ga. 1990) 398 S.E.2d 369, 371.)  That litigation, in turn, may deter 
responsible bidders from participating in the process, thus undermining the 
Legislature‟s goal of “stimulating competition in a manner conducive to sound 
fiscal practices.”  (Pub. Contract Code, § 100, subd. (c).)  Such a result would 
directly contravene the principles underlying the tort of intentional interference 
                                                                                                                                                              
 
(footnote continued from previous page) 
 
obtained through violations of the laws concerning workers‟ compensation and 
unemployment insurance.  The statutes require criminal convictions as a 
prerequisite to the civil suit.  (Pub. Contract Code, §§ 19102, subd. (a)(1), 
20104.70, subd. (a)(1).)  Prevailing wage violations are not mentioned in the 
statutes.  (See also Lab. Code, § 1750.) 
 
 
19 
with prospective economic advantage:  carefully drawing “lines of legal liability in 
a way that maximizes areas of competition free of legal penalties.”  (Della Penna, 
supra, 11 Cal.4th at p. 392.)  Additionally, although the public entities cannot be 
sued for lost profits (see Kajima, supra, 23 Cal.4th at pp. 315-316), they would 
likely be called upon as witnesses and subjected to potentially voluminous 
document requests under the Public Records Act.  Such litigation would risk 
draining government resources, and potentially interfere with the public’s interest 
in having contracts awarded and performed promptly.  “[I]t is incumbent on this 
court to consider the broad-ranging social consequences of the chosen remedy,” 
including whether “[a]llowing recovery of lost profits whenever a contract is 
wrongfully denied ‘could drain the public fisc . . . .’ ”  (Kajima, at pp. 317-318.)  
The costs of recognizing a tort remedy in this context are simply too high.  
III.  DISPOSITION 
We reverse the judgment of the Court of Appeal, and remand with 
directions that the original order sustaining the demurrer be reinstated. 
 
 
 
 
 
 
 
CORRIGAN, J. 
 
WE CONCUR: 
 
CANTIL-SAKAUYE, C. J. 
WERDEGAR, J. 
CHIN, J.   
LIU, J.   
CUÉLLAR, J. 
KRUGER, J. 
 
 
See next page for addresses and telephone numbers for counsel who argued in Supreme Court. 
 
Name of Opinion Roy Allan Slurry Seal, Inc. v. American Asphalt South, Inc. 
__________________________________________________________________________________ 
 
Unpublished Opinion 
Original Appeal 
Original Proceeding 
Review Granted XXX 234 Cal.App.4th 748 
Rehearing Granted 
 
__________________________________________________________________________________ 
 
Opinion No. S225398 
Date Filed: February 16, 2017 
__________________________________________________________________________________ 
 
Court: Superior 
County: Riverside 
Judge: Richard J. Oberholzer* 
 
__________________________________________________________________________________ 
 
Counsel: 
 
Doyle & Schafer, Doyle Schafer McMahon, Daniel W. Doyle and David Klehm for Plaintiffs and 
Appellants. 
 
Altshuler Berzon, Scott A. Kronland and Stacey M. Leyton for State Building and Construction Trades 
Council of California, AFL-CIO as Amicus Curiae on behalf of Plaintiffs and Appellants. 
 
Atkinson, Andelson, Loya, Ruud & Romo, Scott K. Dauscher, Paul G. Szumiak and Jennifer D. Cantrell 
for Defendant and Respondent. 
 
Jarvis, Fay, Doporto & Gibson, Claire M. Gibson and Christine L. Crowl for League of California Cities as 
Amicus Curiae. 
 
 
 
 
 
 
 
 
 
 
*Retired judge of the Kern Superior Court, assigned by the Chief Justice pursuant to article VI, section 6 of 
the California Constitution. 
 
 
 
 
 
 
 
Counsel who argued in Supreme Court (not intended for publication with opinion): 
 
David Klehm 
Doyle Schafer McMahon 
100 Spectrum Center Drive, Suite 520 
Irvine, CA  92618 
(949) 727-7077 
 
Stacey M. Leyton 
Altshuler Berzon 
177 Post Street, Suite 300 
San Francisco, CA  94108 
(415) 421-7151 
 
Paul G. Szumiak 
Atkinson, Andelson, Loya, Ruud & Romo 
12800 Center Court Drive South, Suite 300 
Cerritos, CA  90703-9364 
(562) 653-3200