## Facts

- An ice-distribution business in Santa Monica and Sawtelle, including goodwill, was sold with a covenant that the seller, S.L. Coker, would not sell or distribute ice in the territory as long as the purchaser or its successors operated there.
- Imperial Ice Company later acquired the business and the right to enforce the covenant.
- Coker allegedly resumed selling ice in the restricted territory, breaching the covenant.
- The ice Coker sold was allegedly supplied by a company owned by Wayne Rossier, J.A. Matheson, and Fred Matheson.
- Imperial alleged Rossier and the Mathesons knowingly induced Coker’s breach so they could profit from ice sales to him.
- Imperial sought injunctive relief against Coker for breach and against Rossier and the Mathesons for inducing the breach.

## Issues

1. Whether a complaint states a cause of action for intentional interference with contractual relations when it alleges that competitors knowingly and intentionally induced a contracting party to breach a noncompetition covenant for their own profit.
2. Whether “competition” is a sufficient justification, at the pleading stage, for actively inducing breach of an existing contract.

## Decision

- The California Supreme Court reversed the judgment sustaining Rossier’s and the Mathesons’ demurrer without leave to amend.
- The court held the complaint adequately stated a claim for inducing breach of contract (intentional interference with contractual relations).
- The case was remanded for further proceedings.

## Legal Principles

- A defendant may be liable for intentional interference with contractual relations by inducing a third party to breach a contract, including where the inducement uses lawful means, if the interference is intentional and lacks sufficient justification.
- “Justification” depends on competing public policies; interference may be privileged when protecting interests of greater social value than contractual stability (e.g., certain labor-related objectives or avoidance of harm to health, safety, or morals).
- Competitive freedom may justify seeking business from others where no contract constrains the target relationship, but it does not justify actively and affirmatively inducing the breach of a known, existing contract to gain an economic advantage.
- At the pleading stage, allegations of a valid contract, plaintiff’s enforceable rights, defendants’ knowledge, intentional inducing acts, resulting breach, and damage or threatened damage are sufficient to state a cause of action.

## Conclusion

The court held that competitors are not privileged to intentionally cause the breach of a known contract merely to profit from the breach; because the complaint alleged knowing, intentional inducement of a noncompetition covenant’s breach, dismissal on demurrer was improper.


Imperial Ice Co. v. Rossier, 18 Cal. 2d 33, 112 P.2d 631 (Cal. 1941)