Pacific Gas & Electric Co. v. Bear Stearns & Co

In Pacific Gas & Electric Co. v. Bear Stearns & Co. (1990) 50 Cal.3d 1118, the California Supreme Court ruled that a cause of action for intentional interference with contractual relations or prospective economic advantage could not be based on a defendant's inducement of a party to seek a judicial determination that it could terminate its contract. The high court reasoned that although the defendant was not a litigant and instead had approached the contracting party and agreed to pay half of its attorney fees to litigate that party's right to terminate the contract, "the constitutional doctrine assuring the right to petition the courts may 'impose the outer limits upon the category of conduct that may be subject to liability on the basis of common law doctrine, and thus serve to shape the doctrine itself.'" (50 Cal.3d at p. 1135.) It concluded: "Given the criticism of these causes of action for interference with contract or prospective economic advantage and the dangers inherent in imposing tort liability for competitive business practices, we have no motivation to expand these torts so that they begin to threaten the right of free access to the courts. . . . To permit a cause of action for interference with contract or prospective economic advantage to be based on inducing potentially meritorious litigation on the contract would threaten free access to the courts by providing an end run around the limitations on the tort of malicious prosecution." (50 Cal.3d at p. 1137.)