Page:S.O.S. v. Payday.pdf/12

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1092

886 FEDERAL REPORTER, 2d SERIES

Oren Royal Oaks Venture v. Greenberg, Bernhard, Weiss & Karma, Inc., 42 Cal.3d 1157, 1169, 232 Cal.Rptr. 567, 574, 728 P.2d 1202, 1209 (1986); see also Spellens v. Spellens, 49 Cal.2d 210, 232, 317 P.2d 613, 626 (1957) (abuse of process not found in wrongful procurement of legal process, but in misuse of process after it issues for any purpose other than that which it was designed to accomplish).^[1]

V. Breach of Contract and Tortious Breach of the Implied Covenant of Good Faith and Fair Dealing

Payday asserts that S.O.S. committed a breach of contract and tortious breach of the implied covenant of good faith and fair dealing by denying implicitly the existence of Payday’s license. Payday seeks nominal damages, attorneys’ fees, and punitive damages. The district court dismissed the contract claim on the ground that the contract did not provide for attorneys’ fees, which were the only actual damages sought, and the implied covenant claim on the ground that the contract between Payday and S.O.S. did not give rise to the sort of special relationship that would give rise to tort liability.

The district court decided these claims correctly. Payday cannot recover its attorneys’ fees as damages under a contract theory, where neither statute nor contract provide for attorneys’ fees in the event of breach. Cal.Code Civ.Proc. § 1021.^[2]

Nor does Payday have a cause of action in tort for breach of the implied covenant of good faith and fair dealing. California recognizes such torts only in the context of insurance contracts and other contracts where there is a “special relationship” between the parties to the contract, characterized by elements of public interest, adhesion, and fiduciary responsibility. Foley v. Interactive Data Corp., 47 Cal.3d 654, 687–88, 254 Cal.Rptr. 211, 230, 765 P.2d 373, 392 (1988), citing Seaman’s Direct Buying Service v. Standard Oil Co., 36 Cal.3d 752, 768–69, 206 Cal.Rptr. 354, 362–63, 686 P.2d 1158, 1166–67 (1984). Payday can not demonstrate the existence of such a special relationship here.

CONCLUSION

We reverse the district court’s grant of summary judgment in favor of Payday on the issue of copyright infringement, and remand for further proceedings consistent with this opinion. We also reverse and remand on S.O.S.’s breach of contract and trade secrets counts.

We affirm the district court’s grants of summary judgment in favor of S.O.S. on its account stated claim and dismissing Payday’s counterclaims for abuse of process, tortious breach of the implied covenant of good faith and fair dealing and breach of contract.

REVERSED IN PART, AFFIRMED IN PART, AND REMANDED.

↑ Payday in its Reply Brief asks us to delete a finding of fact made in the course of granting S.O.S.’s motion for summary judgment on this counterclaim, to avoid res judicata or law of the case effect should Payday elect to file a claim for malicious prosecution. That finding of fact states, in effect, that S.O.S. had a proper motive in seeking the writ, E.R. 102 ¶ 9. Because we affirm the district court’s grant of summary judgment on the basis that Payday pled the wrong cause of action, this finding of fact is not necessary to support any judgment so far rendered in this case. We therefore decline either to affirm or upset this finding. We note that Payday has so far presented no evidence that S.O.S. lacked any proper motive or that its action in seeking the writ was baseless. See Bill Johnson’s Restaurants, Inc. v. NLRB, 461 U.S. 731, 743, 163 S.Ct. 2161, 2170, 76 L.Ed.2d 277 (1983). Whether Payday should be allowed to present additional evidence to support a malicious prosecution claim is a question we leave to be decided in the first instance by the trial court when and if Payday brings such a claim.
↑ Nor can the contract be construed as an implied covenant not to sue, as Payday argues. The cases cited by Payday establish only that a contract of settlement includes an implied covenant not to sue. See, e.g., Winchester Drive-in Theatre, Inc. v. Warner Bros. Pictures Distributing Corp., 358 F.2d 432, 436 (9th Cir.1966). The contract between Payday and S.O.S. is clearly not a contract of settlement.

[1] Payday in its Reply Brief asks us to delete a finding of fact made in the course of granting S.O.S.’s motion for summary judgment on this counterclaim, to avoid res judicata or law of the case effect should Payday elect to file a claim for malicious prosecution. That finding of fact states, in effect, that S.O.S. had a proper motive in seeking the writ, E.R. 102 ¶ 9. Because we affirm the district court’s grant of summary judgment on the basis that Payday pled the wrong cause of action, this finding of fact is not necessary to support any judgment so far rendered in this case. We therefore decline either to affirm or upset this finding. We note that Payday has so far presented no evidence that S.O.S. lacked any proper motive or that its action in seeking the writ was baseless. See Bill Johnson’s Restaurants, Inc. v. NLRB, 461 U.S. 731, 743, 163 S.Ct. 2161, 2170, 76 L.Ed.2d 277 (1983). Whether Payday should be allowed to present additional evidence to support a malicious prosecution claim is a question we leave to be decided in the first instance by the trial court when and if Payday brings such a claim.

[2] Nor can the contract be construed as an implied covenant not to sue, as Payday argues. The cases cited by Payday establish only that a contract of settlement includes an implied covenant not to sue. See, e.g., Winchester Drive-in Theatre, Inc. v. Warner Bros. Pictures Distributing Corp., 358 F.2d 432, 436 (9th Cir.1966). The contract between Payday and S.O.S. is clearly not a contract of settlement.

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