## Facts

- Los Angeles Airways, Inc. (LAA), a helicopter airline, claimed it reached an oral agreement with Summa Corporation and Hughes Air Corporation for those entities to purchase all of LAA’s assets and liabilities.
- Chester C. Davis served during the negotiations as general counsel for Summa, attorney for Howard Hughes and Hughes Air, and an officer and director of Hughes Air; he later became a director of Summa.
- LAA alleged Davis intentionally induced Hughes, Summa, and Hughes Air not to proceed with the alleged agreement, causing a breach.
- LAA asserted Davis acted not only for the entities’ benefit but also to advance his own standing within the Hughes organization and to weaken another executive.
- Davis denied the existence of any binding oral agreement and asserted an affirmative defense that any inducement was privileged because he acted as attorney and fiduciary officer/director for the relevant principals.

## Issues

1. Whether, under California law, an attorney/officer/director acting as a fiduciary for the contracting principals is privileged to induce the principals’ nonperformance, even if the fiduciary also has alleged personal motives.
2. Whether the same privilege applies to a claim framed as interference with prospective/advantageous economic relations, as well as interference with an existing contract.
3. Whether the privilege issue could be resolved on summary judgment where the fiduciary roles were undisputed.

## Decision

- The Ninth Circuit affirmed summary judgment for Davis.
- The court held Davis’s conduct fell within a fiduciary privilege that protects attorneys and corporate officers/directors when they act within the scope of authority to serve the principal’s interests, even if personal motives are also alleged.
- The court held the privilege applies equally to interference with contract and interference with an advantageous business relationship on these facts.
- Because the privilege required judgment for Davis as a matter of law, the court did not reach challenges concerning amendment of pleadings or Davis’s cross-appeal on third-party practice.

## Legal Principles

- Under California law, a fiduciary (including a corporate attorney, officer, or director) is generally privileged to advise, recommend, or cause the principal to refuse performance or breach a contract when acting within the scope of fiduciary authority to protect the principal’s interests.
- The privilege is not automatically defeated by allegations of mixed motives or incidental personal benefit; the key inquiry is whether the conduct was substantially directed toward serving the principal.
- When material facts establishing the fiduciary relationship and scope of role are not genuinely disputed, the privilege defense can be decided on summary judgment and bars tort liability for interference.

## Conclusion

The Ninth Circuit held that a corporate attorney/officer/director was privileged to induce the principal entities not to proceed with an alleged transaction under California fiduciary-privilege doctrine, and that allegations of internal political or personal advantage did not, without more, negate the privilege; summary judgment for the fiduciary was therefore proper.


Los Angeles Airways, Inc. v. Davis, 687 F.2d 321 (9th Cir. 1982)