PMC, Inc. v. Saban Entertainment, Inc
PMC, Inc. v. Saban Entertainment, Inc. (1996) 45 Cal.App.4th 579 concerned a manufacturer's action against an entertainment company. The manufacturer was bidding to obtain exclusive rights to market and manufacture items using the name of a children's television series, but the entertainment company ultimately entered into a contract with the manufacturer's competitor. The manufacturer brought causes of action for breach of contract against the entertainment company and interference with contractual and prospective economic advantage against the competitor.
In rejecting the manufacturer's cause of action for interference with prospective economic advantage, the PMC court made reference to the "competition privilege." (PMC, supra, 45 Cal.App.4th at p. 602, italics omitted.) Under that privilege, "'a competitor is free to divert business to himself as long as he uses fair and reasonable means.' ." (Id. at p. 603.)
In that case, there was no evidence that the competitor had engaged in any wrongful or illegitimate conduct, but was "simply engaging in hard-nosed and ultimately successful bargaining for the exclusive license also sought by the plaintiff manufacturer." (Id. at p. 606.) Significantly, the PMC court did not apply the competition privilege in its discussion of the tort of interference with contractual relations--instead, it found that "no enforceable contract existed." (Ibid.)
The court held a valid enforceable contract must be pled and proved for recovery under a theory of intentional interference with contract. The rationale behind this holding is that "if a party is not obligated to perform a contract and may refuse to do so at his election without penalty, then the other party to that agreement enjoys nothing more than an expectancy." (Ibid.)