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MEMORANDUM

PRIVILEGED & CONFIDENTIAL — ATTORNEY WORK PRODUCT

TO: Yuki Nakamura, Senior Associate

FROM: Carlos Espinoza, Associate

DATE: October 8, 2021

RE: California Tortious Interference Law — Elements and Defenses

MATTER: Vantor Holdings Corp. v. Cascade Retail Holdings Inc., Case No. 21STCV-34872 (Superior Court of California, County of Los Angeles)

MATTER NO.: 1038-00007

CLIENT: Cascade Retail Holdings Inc.

I. Introduction and Purpose

The purpose of this memorandum is to provide a comprehensive analysis of California tortious interference law as it applies to the claims asserted by Vantor Holdings Corp. ("Vantor") against our client, Cascade Retail Holdings Inc. ("Cascade"), in the above-referenced action. This memorandum is intended to serve as a foundational analytical resource for the defense team as we finalize Cascade's answer and affirmative defenses and develop the broader litigation strategy.

Vantor filed its complaint on September 7, 2021, in the Superior Court of California, County of Los Angeles, asserting three causes of action: (1) tortious interference with contractual relations; (2) tortious interference with prospective economic advantage; and (3) unfair business practices under California Business and Professions Code Section 17200 et seq. The complaint names Cascade as the sole defendant.

At the core of Vantor's allegations is the contention that Cascade systematically induced three of Vantor's key consumer-goods suppliers — Hemsworth Consumer Products LLC ("Hemsworth"), Tridale Manufacturing Inc. ("Tridale"), and Orion Lifestyle Brands Corp. ("Orion") — to breach exclusive supply agreements with Vantor, thereby causing Vantor alleged damages of approximately $87.4 million. Vantor characterizes Cascade's conduct as a deliberate and coordinated "campaign" to strip Vantor of its most valuable supplier relationships, allegedly in furtherance of Cascade's internal strategic initiative known as "Project Atlas."

Cascade's answer and affirmative defenses are currently being prepared for filing on October 18, 2021. This memorandum is intended to inform the substantive defense strategy by identifying the elements of each cause of action, surveying the leading California precedent governing those elements, and evaluating the available defenses as applied to the facts currently known to us. The analysis contained herein is based on the allegations set forth in Vantor's complaint, Cascade's internal documents produced to date (including Project Atlas files), and the relevant contractual provisions of the exclusive supply agreements as described in the complaint and its exhibits.

This memorandum will address each of Vantor's three causes of action in turn, analyze the required elements under governing California law, survey leading judicial precedent, and assess the viability and strength of the defenses available to Cascade. The memorandum concludes with recommendations for the defense strategy, including discovery priorities, dispositive motion opportunities, and expert retention considerations.

II. Factual Background Relevant to Legal Analysis

The following factual summary is drawn from the allegations in Vantor's complaint, the exhibits attached thereto, and Cascade's internal records reviewed to date. This background provides the necessary factual context for the legal analysis that follows. We note that the factual record will continue to develop as discovery proceeds, and certain key factual questions remain unresolved at this stage.

A. The Vantor–Supplier Exclusive Supply Agreements

Vantor is a California-based consumer-goods holding company that, through its various subsidiaries, distributes a range of consumer products through retail and e-commerce channels. According to the complaint, Vantor maintained exclusive supply agreements with three suppliers that are central to this dispute:

Orion Lifestyle Brands Corp. Orion is a California corporation engaged in the manufacture and distribution of personal care and wellness products. Vantor and Orion entered into a four-year exclusive supply agreement executed on July 1, 2018, with an expiration date of June 30, 2022. The agreement provided for a minimum annual purchase commitment by Vantor of $14.6 million. Notably, the agreement contained a termination-for-convenience clause permitting either party to terminate the agreement upon 120 days' written notice to the other party. The exclusivity provision, as described in the complaint, prohibited Orion from supplying specified product categories to any competitor of Vantor in defined geographic markets during the term of the agreement.

Hemsworth Consumer Products LLC. Hemsworth is an Oregon limited liability company engaged in the manufacture of home goods and kitchen accessories. Vantor and Hemsworth entered into a three-year exclusive supply agreement executed on March 15, 2019, with an expiration date of March 14, 2022. The agreement provided for a minimum annual purchase commitment by Vantor of $12.5 million. The termination-for-convenience clause in the Hemsworth agreement permitted either party to terminate upon 90 days' written notice. As with the Orion agreement, the exclusivity provision restricted Hemsworth from supplying specified product lines to Vantor's competitors during the term.

Tridale Manufacturing Inc. Tridale is a Nevada corporation engaged in the manufacture of consumer electronics accessories. Vantor and Tridale entered into a two-year exclusive supply agreement executed on January 10, 2020, with an expiration date of January 9, 2022. The agreement provided for a minimum annual purchase commitment by Vantor of $8.3 million. The termination-for-convenience clause permitted either party to terminate upon 60 days' written notice. The exclusivity provision mirrored those in the other two agreements in material respects.

A critical feature of all three agreements, as discussed in detail below, is the inclusion of termination-for-convenience clauses that permitted either party — including the suppliers — to terminate the agreements upon specified notice periods without cause. The legal significance of these provisions cannot be overstated, as they bear directly on the questions of whether a "breach" occurred and on the measure of any recoverable damages.

B. Cascade's Project Atlas and New Supply Agreements

In February 2021, Cascade launched an internal strategic initiative designated "Project Atlas." According to Cascade's internal documents, Project Atlas was a supplier diversification initiative designed to expand and strengthen Cascade's supply base across several key product categories, including home goods, consumer electronics accessories, and personal care products. The initiative was led by Annika Bergström, Vice President of Strategic Sourcing, who reported to Lena Torvik, Senior Vice President of Supply Chain and Procurement. Cascade allocated a budget of approximately $4.2 million for supplier transition costs associated with Project Atlas, including onboarding expenses, logistics integration, and initial marketing support.

The complaint alleges — and Cascade's records confirm — that Cascade entered into new supply agreements with each of the three suppliers at issue:

• Cascade–Orion Supply Agreement: Executed May 10, 2021. Four-year term. Annual purchase commitment of $31.0 million — more than double Vantor's $14.6 million annual commitment under the existing Vantor–Orion agreement.

• Cascade–Hemsworth Supply Agreement: Executed June 1, 2021. Five-year term. Annual purchase commitment of $28.0 million — more than double Vantor's $12.5 million annual commitment under the existing Vantor–Hemsworth agreement.

• Cascade–Tridale Supply Agreement: Executed August 15, 2021. Three-year term. Annual purchase commitment of $19.5 million — more than double Vantor's $8.3 million annual commitment under the existing Vantor–Tridale agreement.

Vantor contends that these agreements were the product of Cascade's deliberate campaign to induce the suppliers to breach their exclusivity obligations to Vantor. Cascade's position, as discussed in detail below, is that these agreements reflect ordinary, arm's-length commercial negotiations with willing suppliers who independently determined that the Cascade relationships offered superior commercial terms and independently exercised their contractual termination rights.

C. Key Factual Questions for Legal Analysis

Several factual questions are critical to the legal analysis and remain subject to further development through discovery:

First, whether Cascade had actual knowledge of the exclusivity provisions in the Vantor–supplier agreements at the time Cascade entered into its own agreements with the suppliers. As discussed below, this is a threshold element of the tortious interference with contractual relations claim, and Cascade's position is that it lacked such knowledge. However, Vantor's complaint points to communications during the Project Atlas process that allegedly demonstrate awareness of the Vantor–supplier relationships. Our preliminary review has identified 14 internal Project Atlas emails (out of a total of 2,847 Project Atlas-related emails) that reference Vantor's existing supplier relationships. These emails are being reviewed separately and in detail by the litigation team to assess what, if anything, they demonstrate about Cascade's knowledge of the specific contractual terms — including exclusivity provisions — of the Vantor–supplier agreements.

Second, whether the three suppliers independently exercised their termination-for-convenience clauses before entering into their agreements with Cascade. If the suppliers properly terminated their agreements with Vantor in accordance with the contractual notice provisions, then there was no "breach" of the Vantor–supplier agreements, and Vantor's first cause of action for tortious interference with contractual relations fails as a matter of law with respect to Element 4.

Third, whether Cascade employed any independently wrongful conduct or improper means — such as fraud, misrepresentation, threats, or economic duress — in securing the new supplier relationships. This question is particularly relevant to the second cause of action for tortious interference with prospective economic advantage, which requires proof of "independently wrongful" conduct. A preliminary review of the complaint and Cascade's internal records does not reveal any allegation or evidence of such conduct.

Fourth, the nature and scope of Vantor's mitigation efforts following the loss of the supplier relationships. Under California law, a plaintiff has a duty to take reasonable steps to mitigate its damages, and Vantor's failure to do so — if established — would reduce or eliminate recoverable damages. Discovery will need to focus on the steps, if any, that Vantor undertook to identify and secure replacement suppliers following the termination of the three agreements.

III. Tortious Interference with Contractual Relations (First Cause of Action)

A. Elements Under California Law

California has long recognized the tort of intentional interference with contractual relations. The tort protects a party's interest in the stability and performance of existing contracts against unjustified interference by third parties. Under California law, a plaintiff asserting a claim for tortious interference with contractual relations must prove each of the following five elements:

1. The existence of a valid contract between the plaintiff and a third party;

2. The defendant's knowledge of the contract;

3. The defendant's intentional acts designed to induce a breach or disruption of the contractual relationship;

4. An actual breach or disruption of the contractual relationship; and

5. Resulting damage to the plaintiff.

See Harborview Industries (1990) 50 Cal.3d 1118, 1126; Camberwell Corporation (1998) 19 Cal.4th 26, 55; Restatement (Second) of Torts § 766 (1979). California courts have consistently adopted and applied the framework set forth in the Restatement (Second) of Torts in analyzing tortious interference claims. See della Penna v. Crowne Albany Industries (1995) 11 Cal.4th 376, 392–93.

It is important to note at the outset that California recognizes tortious interference with contractual relations as an intentional tort. Negligent interference with contractual relations is generally not actionable under California law. See Applied Equipment Corp. v. Litton Saudi Arabia Ltd. (1994) 7 Cal.4th 503, 514 (distinguishing intentional from negligent interference and confirming that only the former is recognized). The plaintiff must demonstrate that the defendant acted with the intent to disrupt the contractual relationship — not merely that the defendant intended the act that incidentally caused a disruption. This requirement of specific intent is central to the analysis and, as discussed below, interacts with the knowledge and inducement elements in significant ways.

Each of the five elements is analyzed below as applied to the facts of this case.

B. Element 1: Existence of a Valid Contract

The first element requires Vantor to prove the existence of valid, enforceable contracts between Vantor and the three supplier third parties — Hemsworth, Tridale, and Orion — at the time of the alleged interference. Based on the information currently available, it appears that this element is likely satisfied. The exclusive supply agreements between Vantor and each of the three suppliers were executed in writing, contained definite terms (including pricing, duration, minimum purchase commitments, and exclusivity provisions), and were supported by adequate consideration. We are not aware, at this time, of any basis to challenge the validity or enforceability of the agreements themselves.

However, a significant analytical issue arises from the inclusion of termination-for-convenience clauses in each of the three agreements. As noted above, each agreement permitted either party to terminate the agreement upon specified notice periods: 90 days for Hemsworth, 60 days for Tridale, and 120 days for Orion. Under California law, a contract that is terminable at will or upon notice remains a valid and enforceable contract for purposes of the first element of a tortious interference claim. See Blank v. Kirwan (1985) 39 Cal.3d 311, 331; Restatement (Second) of Torts § 766, cmt. g (noting that "the fact that the contract is terminable at will does not prevent the existence of a valid contract" for interference purposes). Accordingly, the terminability of the agreements does not defeat the first element.

That said, the terminability of the contracts has significant implications for both the interference analysis and the damages analysis. As discussed in greater detail below, if the suppliers were contractually entitled to terminate their agreements with Vantor upon notice — and did in fact exercise that right — then the question arises whether there was an actual "breach" at all (Element 4), and the measure of any recoverable damages is necessarily constrained to the remaining contract term, minus any periods covered by proper termination notice.

Additionally, the enforceability of the exclusivity provisions themselves merits attention. Exclusive dealing arrangements are generally enforceable under California contract law, provided they do not constitute unreasonable restraints of trade. See Tampa Bay Shipbuilding & Repair Co. v. Cedar Shipping Co., Ltd. (11th Cir. 2003) 320 F.3d 1213, 1225 (applying analogous principles). We do not currently anticipate that the exclusivity provisions in these agreements would be found unenforceable as unreasonable restraints, given their limited duration and defined scope, but this issue should be monitored as additional facts develop.

In summary, Element 1 is likely satisfied with respect to all three supplier agreements, and we do not recommend challenging this element as a primary defense strategy.

C. Element 2: Knowledge of the Contract

The second element — the defendant's knowledge of the plaintiff's contract — is a critical component of Cascade's defense and warrants careful analysis.

Under California law, a plaintiff must prove that the defendant had actual knowledge of the existence of the contract at the time of the alleged interference. Constructive or imputed knowledge is generally insufficient. See Camberwell Corporation, supra, 19 Cal.4th at 56 ("The plaintiff must show that the defendant knew of the existence of the contractual relationship."); PMC, Inc. v. Saban Entertainment, Inc. (1996) 45 Cal.App.4th 579, 603 (holding that "knowledge means actual knowledge, not constructive knowledge"). This requirement serves a critical gatekeeper function: it ensures that liability for tortious interference attaches only where the defendant acted with awareness that its conduct would interfere with an existing contractual obligation, rather than where the defendant merely engaged in ordinary competitive behavior without knowledge of any contractual entanglement.

A significant question arises regarding the level of specificity required for the "knowledge" element. California courts have not uniformly articulated whether the defendant must know the specific terms of the contract — including, in this case, the exclusivity provisions — or whether general awareness that the plaintiff has "some kind of relationship" with the third party suffices. The better view, supported by the Restatement and the weight of California authority, is that the defendant must have sufficient knowledge to understand that its conduct would interfere with a specific contractual obligation. See Restatement (Second) of Torts § 766, cmt. i ("It is not necessary, however, that the actor appreciate the legal significance of the facts giving rise to the contractual duty … It is enough that he knows those facts that give rise to the contractual duty."). Mere awareness that a competitor has a "relationship" with a supplier, without knowledge that the relationship includes exclusivity obligations, is arguably insufficient to establish the knowledge element for a tortious interference with exclusivity claim. The interference must be with the specific contractual terms alleged to have been breached.

Application to the facts: Cascade's position is that it did not have actual knowledge of the exclusivity provisions in Vantor's supply agreements at the time Cascade entered into its own agreements with Hemsworth, Tridale, and Orion. Cascade was aware that these suppliers had existing business relationships with various customers, as would be expected in the ordinary course of commerce, but Cascade contends that it was not aware of the specific terms — and in particular the exclusivity restrictions — contained in the Vantor–supplier agreements.

This defense is subject to challenge based on the internal Project Atlas communications. As noted above, our preliminary review has identified 14 internal emails (out of 2,847 total Project Atlas-related emails) that reference Vantor's existing supplier relationships. These emails are being carefully reviewed by the litigation team. The critical question is whether these emails demonstrate that Cascade personnel had actual knowledge of the exclusivity provisions, or whether they merely reflect general awareness that the suppliers had existing customer relationships (which would not be sufficient). If the emails merely reference Vantor as a current customer of the suppliers — e.g., noting that "Hemsworth currently supplies Vantor" — without any indication that the Cascade team understood the arrangements to be exclusive, they are insufficient to establish the knowledge element. On the other hand, if any of the emails reference the exclusivity terms specifically, or reflect an awareness that the suppliers were contractually restricted from dealing with Vantor's competitors, the knowledge defense becomes more difficult to sustain.

It is also important to note that the burden of proof rests squarely on Vantor to prove Cascade's knowledge. Cascade does not bear the burden of proving that it lacked knowledge. This allocation of the burden of proof is significant because it means that if the evidence on the knowledge question is ambiguous or equivocal, Cascade should prevail on this element.

We recommend that the defense team prioritize the review and analysis of the 14 identified emails as a matter of urgency, and that discovery be directed at identifying any additional communications — whether internal to Cascade or exchanged with the suppliers — that bear on the knowledge question.

D. Element 3: Intentional Acts Designed to Induce Breach or Disruption

The third element requires Vantor to prove that Cascade committed intentional acts designed to induce a breach or disruption of the Vantor–supplier contractual relationships. This element implicates the fundamental distinction between legitimate competitive activity and tortious conduct.

Under California law, the defendant must have intended to disrupt the plaintiff's contractual relationship — not merely intended the act itself that may have had the incidental effect of disrupting the relationship. See Quelimane Co., supra, 19 Cal.4th at 55–56. The intent requirement is specific: the defendant must have acted with the purpose of causing a breach or disruption, or with knowledge that a breach or disruption was substantially certain to result from the defendant's conduct.

California courts have consistently recognized that the mere act of offering a better deal to a contracting party is not, in itself, tortious. "Competition for business is not actionable as tortious interference with contractual relations, even if the competition results in a party's decision to terminate an existing contract." See Imperial Ice Co. v. Rossier (1941) 18 Cal.2d 33, 36–37 (recognizing that legitimate competition is a defense to tortious interference). The law does not require a competitor to refrain from making attractive offers to potential suppliers or customers merely because those suppliers or customers have existing contractual relationships with a rival. Such a rule would stifle competition and chill ordinary business activity.

The critical distinction is between (a) offering superior terms in the marketplace, which is legitimate competitive conduct, and (b) actively and intentionally inducing a contracting party to breach its existing obligations, which may be tortious. The former is permissible even if the competitor knows that the other party has an existing contract. The latter requires some affirmative act of inducement — persuasion, encouragement, or facilitation directed at causing the breach — beyond the mere presentation of a better commercial opportunity.

Additionally, the question of "improper means" is relevant to this element. Where a defendant employs improper means — such as threats, fraud, misrepresentation, economic duress, or other independently tortious conduct — to induce a breach, the inference of tortious intent is significantly strengthened. Conversely, where a defendant merely enters into arm's-length negotiations and offers commercially superior terms, the inference of tortious intent is weak or nonexistent.

Application to the facts: Cascade entered into supply agreements with Hemsworth, Tridale, and Orion that offered substantially higher annual purchase commitments than Vantor's existing agreements:

The disparity in financial terms is significant and provides a straightforward commercial explanation for the suppliers' decisions to transition their business to Cascade. Cascade's offering of superior terms is quintessentially competitive behavior. Vantor's complaint does not allege — and we are not aware of any evidence suggesting — that Cascade employed any improper means such as threats, fraud, misrepresentation, or economic duress in securing these agreements. The complaint characterizes Cascade's conduct as a "systematic campaign to poach" Vantor's suppliers, but this characterization, without more, does not transmute legitimate competitive activity into tortious inducement.

Cascade's position is that it engaged in ordinary competitive bidding for supplier relationships and that the suppliers independently chose to enter into the Cascade agreements based on the commercially superior terms offered. This position is well-supported by California precedent, which holds that offering a better deal is a hallmark of competition, not of tortious interference.

We note, however, that the fact-finder's assessment of this element may turn on the totality of the circumstances, including the timing and sequence of Cascade's outreach to the suppliers, the content of communications between Cascade personnel and supplier representatives, and whether Cascade took any affirmative steps to encourage the suppliers to breach (as opposed to terminate) their existing agreements with Vantor. These are questions that will be developed through discovery, and we recommend that Cascade's document review and witness preparation focus on establishing that Cascade's communications with the suppliers were limited to ordinary commercial negotiations and did not include any encouragement to breach the Vantor agreements.

E. Element 4: Actual Breach or Disruption

The fourth element requires Vantor to prove that an actual breach or disruption of the Vantor–supplier contractual relationships occurred. This element presents one of Cascade's strongest defenses.

Vantor's complaint alleges that the three suppliers "breached" their exclusive supply agreements with Vantor by entering into competing supply agreements with Cascade. However, a critical factual question — which must be resolved through discovery — is whether the suppliers exercised their termination-for-convenience clauses before entering into the Cascade agreements. If the suppliers properly terminated their agreements with Vantor by providing the requisite notice (90 days for Hemsworth, 60 days for Tridale, and 120 days for Orion), then there was no "breach" of the Vantor–supplier agreements. A lawful exercise of a contractual termination right is not a breach of contract — it is the exercise of a right expressly granted by the contract itself.

The weight of California authority supports this distinction. A party cannot "breach" a contract by doing precisely what the contract authorizes the party to do. See Restatement (Second) of Contracts § 235, cmt. b (1981) (performance or tender in accordance with contract terms satisfies the duty). The Restatement (Second) of Torts likewise recognizes this principle in the context of tortious interference: where the third party's conduct is authorized by the terms of the contract, there is no "breach" for purposes of the tortious interference analysis. See Restatement (Second) of Torts § 766, cmt. g.

California appellate courts have addressed this issue in the context of at-will employment and other terminable relationships. In Ixchel Pharma, LLC v. Biogen, Inc. (2020) 9 Cal.5th 1130, the California Supreme Court considered the standards governing tortious interference claims in the context of at-will relationships, and the court's analysis reinforced the principle that a defendant's liability for interference turns on whether the challenged conduct caused a breach of a legally binding obligation, as distinguished from a lawful decision to terminate a voluntary relationship.

Application to the facts: If the record establishes — through discovery of the suppliers' termination notices, communications, and testimony — that each supplier delivered proper written notice of termination to Vantor under the applicable termination-for-convenience clause before executing its supply agreement with Cascade, then Vantor's contractual interference claim fails as a matter of law. There would have been no "breach" of the exclusive supply agreements; there would have been only a lawful termination followed by the formation of new commercial relationships.

This defense is potentially dispositive of the first cause of action and should be a top priority in discovery. We recommend that Cascade issue targeted discovery to each of the three suppliers (through third-party subpoenas) seeking all documents and communications relating to the exercise of termination rights under the Vantor–supplier agreements, including copies of any termination notices delivered to Vantor.

If the suppliers did not properly exercise their termination-for-convenience clauses prior to contracting with Cascade, the analysis becomes more complex, and the breach element would need to be evaluated based on the specific timeline and circumstances of each supplier's transition.

F. Element 5: Resulting Damage

The fifth element requires Vantor to prove that it suffered damage as a result of the alleged tortious interference. Vantor claims total damages of approximately $87.4 million, broken down as follows:

According to the complaint, these figures are based on projected multi-year revenue streams attributable to the supplier relationships, discounted to present value at a rate of 8.5%. Vantor has retained Meridian Forensic Economics LLC, with Dr. Harold Pryce serving as the designated expert, to support its damages methodology. Cascade is currently evaluating the retention of its own forensic economics expert to rebut Vantor's damages analysis.

At this stage, the damages element raises a significant legal question: whether Vantor's claimed damages are too speculative to be recoverable as a matter of law. Under California law, damages for lost profits must be proved with "reasonable certainty." See GHK Associates v. Mayer Group, Inc. (1990) 224 Cal.App.3d 856, 873 ("Damages which are speculative, remote, imaginary, contingent, or merely possible cannot serve as a legal basis for recovery."). A plaintiff cannot recover damages based on speculative projections of revenue streams that were never guaranteed and that depended on the continued performance of contracts containing termination-for-convenience clauses.

Vantor's claimed damages of $87.4 million appear to extend well beyond the remaining terms of the existing supply agreements. Given that each agreement contained a termination-for-convenience clause, Vantor's expectation that the supplier relationships would continue indefinitely (or be renewed) was inherently uncertain. As discussed in greater detail in Section VI.E below, the provable damages range — based on the remaining contract terms at the time of the alleged breach — is estimated at approximately $6.1 million to $11.3 million, a fraction of Vantor's $87.4 million claim.

The damages analysis is largely an expert question and will be developed through expert discovery. However, the legal argument that Vantor's damages methodology is flawed — because it projects revenue streams far beyond the remaining contract terms of terminable-at-convenience agreements — should be preserved and asserted at the summary judgment stage.

IV. Tortious Interference with Prospective Economic Advantage (Second Cause of Action)

A. Elements Under California Law

Vantor's second cause of action asserts tortious interference with prospective economic advantage. This tort protects a party's interest in prospective economic relationships — relationships that have not yet ripened into binding contracts — from unjustified interference by third parties. The tort is distinct from tortious interference with contractual relations in several important respects, the most significant of which is the requirement that the defendant's conduct be "independently wrongful."

Under California law, a plaintiff asserting a claim for tortious interference with prospective economic advantage must prove each of the following five elements:

1. An economic relationship between the plaintiff and a third party, with the probability of future economic benefit to the plaintiff;

2. The defendant's knowledge of the relationship;

3. The defendant engaged in independently wrongful conduct;

4. The independently wrongful conduct disrupted the relationship; and

5. Resulting damage to the plaintiff.

See Glenrock Corporation (2003) 29 Cal.4th 1134, 1153; della Penna v. Crowne Albany Industries (1995) 11 Cal.4th 376, 392–93; Ixchel Pharma, LLC v. Biogen, Inc. (2020) 9 Cal.5th 1130, 1141. The California Supreme Court has emphasized the distinction between this tort and the tort of interference with existing contractual relations, particularly with respect to the third element — the requirement of independently wrongful conduct — which imposes a higher burden on plaintiffs claiming interference with prospective, as opposed to existing, contractual relationships. See della Penna, supra, 11 Cal.4th at 392–93 (adopting the independently wrongful conduct requirement to prevent the tort from becoming "a means for casting a chill on ordinary competitive behavior").

B. The "Independently Wrongful Conduct" Requirement

The independently wrongful conduct requirement is the most significant distinction between this tort and the tort of interference with existing contractual relations, and it represents a critical defense opportunity for Cascade.

Under California law, a plaintiff claiming tortious interference with prospective economic advantage must prove that the defendant's conduct was "independently wrongful" — that is, wrongful apart from the interference itself. The California Supreme Court has explained that this requirement ensures that mere competitive conduct — even aggressive competition — does not give rise to liability for tortious interference. See della Penna, supra, 11 Cal.4th at 393 ("It is not enough that the defendant's conduct was intentional and that the plaintiff was thereby deprived of a prospective economic advantage. Something more is required."); Korea Supply Co., supra, 29 Cal.4th at 1158–59.

To satisfy the independently wrongful conduct requirement, the plaintiff must demonstrate that the defendant's conduct was independently actionable — meaning it would be actionable as a violation of a statute, regulation, or recognized legal duty, or would constitute conduct that is independently tortious, such as fraud, misrepresentation, threats, defamation, or violation of an established common-law standard. See Ixchel Pharma, supra, 9 Cal.5th at 1142 (clarifying that "an act is independently wrongful if it is unlawful, that is, if it is proscribed by some constitutional, statutory, regulatory, common law, or other determinable legal standard"). The court in Ixchel Pharma further clarified that this standard applies uniformly and that a plaintiff cannot satisfy the independently wrongful conduct requirement by merely characterizing competitive behavior in pejorative terms.

Application to the facts: Vantor's complaint alleges that Cascade engaged in a "systematic campaign" to "poach" Vantor's suppliers, and that this conduct constitutes independently wrongful activity. However, the complaint does not identify any specific statute, regulation, or recognized legal duty that Cascade's conduct violated. Nor does the complaint allege that Cascade employed fraud, misrepresentation, threats, economic duress, or any other independently tortious means in its dealings with the suppliers. The complaint's characterization of Cascade's conduct as "systematic" does not, in itself, transform ordinary competitive behavior into independently wrongful conduct. Every successful business strategy is, by its nature, systematic.

Cascade's position is compelling on this element: entering into supply agreements with willing suppliers who independently chose to terminate their prior arrangements and enter into new, commercially superior relationships with Cascade is classic competitive behavior. It is the very type of conduct that the California Supreme Court sought to protect from tort liability when it adopted the independently wrongful conduct requirement in della Penna. Absent evidence that Cascade employed improper means — fraud, threats, misrepresentation, bribery, or similar conduct — Vantor cannot satisfy this element as a matter of law.

C. The "Probability of Future Economic Benefit" Requirement

The first element of this tort requires Vantor to demonstrate that there existed an economic relationship between Vantor and the suppliers with the "probability of future economic benefit" to Vantor. This requires more than a mere hope or expectation of future dealings; there must have been a reasonable probability that the supplier relationships would have continued or been renewed beyond their existing contractual terms.

The termination-for-convenience clauses in the Vantor–supplier agreements significantly undermine Vantor's ability to establish this element. If the suppliers could terminate their agreements with Vantor at any time upon relatively short notice (60, 90, or 120 days), Vantor's expectation that these relationships would continue indefinitely — or would be renewed upon expiration — was inherently uncertain. A party cannot claim a "reasonable probability" of continued economic benefit from a relationship that the counterparty is contractually entitled to terminate at will.

Moreover, the remaining contract terms at the time Cascade executed its agreements with the suppliers were relatively short:

The probability that these relationships would have been renewed beyond their existing terms is speculative at best, particularly given that the suppliers demonstrated their willingness to transition to a competitor offering substantially better terms. The very fact that the suppliers chose to move to Cascade undercuts Vantor's argument that there was a "reasonable probability" of continued economic benefit from the Vantor–supplier relationships.

D. Application to This Case — Summary Assessment

The prospective economic advantage claim is potentially the weakest of Vantor's three causes of action, primarily because of the independently wrongful conduct requirement. Vantor's complaint does not allege — and we are not aware of any evidence that would support — a finding that Cascade engaged in independently wrongful conduct beyond the act of competing for supplier relationships in the marketplace.

We recommend that Cascade consider filing a motion for summary judgment on this claim at the appropriate time, arguing that Vantor cannot meet the independently wrongful conduct standard as a matter of law. Given the California Supreme Court's clear articulation of this standard in della Penna, Korea Supply Co., and Ixchel Pharma, and the absence of any allegation of fraud, threats, or other improper conduct, this motion has a strong likelihood of success. The motion should be timed to follow targeted discovery on the question of whether any independently wrongful conduct occurred, so that the evidentiary record fully supports the motion.

V. Unfair Business Practices — Cal. Bus. & Prof. Code § 17200 (Third Cause of Action)

A. Elements of a Section 17200 Claim

Vantor's third cause of action is brought under California Business and Professions Code Section 17200 et seq., commonly known as the Unfair Competition Law ("UCL"). Section 17200 defines "unfair competition" broadly to include "any unlawful, unfair or fraudulent business act or practice." The statute provides for both public and private enforcement, though private enforcement is subject to standing requirements enacted by Proposition 64 in 2004.

The UCL establishes three alternative prongs under which a plaintiff may proceed: the "unlawful" prong, the "unfair" prong, and the "fraudulent" prong. A plaintiff need only establish a violation under one prong to prevail. Based on the allegations in Vantor's complaint, Vantor appears to proceed primarily under the "unfair" prong and potentially under the "unlawful" prong. The complaint does not appear to assert a viable theory under the "fraudulent" prong, as it does not allege any fraud, deception, or misrepresentation by Cascade.

As a threshold matter, Vantor must satisfy the standing requirements imposed by Proposition 64. Under Business and Professions Code Section 17204, a private plaintiff must demonstrate that it has "suffered injury in fact and [has] lost money or property as a result of the unfair competition." See Kwikset Corp. v. Superior Court (2011) 51 Cal.4th 310, 322–23. Vantor alleges lost revenue and profits as a result of Cascade's conduct, which likely satisfies the standing requirement, though the causal connection between Cascade's alleged unfair practices and Vantor's injury will need to be established.

B. The "Unlawful" Prong

The "unlawful" prong of the UCL "borrows" violations of other laws — including statutes, regulations, and common-law duties — and treats them as independently actionable unfair business practices under Section 17200. See Cel-Tech Communications, Inc. v. Los Angeles Cellular Telephone Co. (1999) 20 Cal.4th 163, 180. The unlawful prong essentially provides an additional remedy for conduct that independently violates some other legal standard.

The derivative nature of the unlawful prong is critical to the analysis. If the underlying tortious interference claims fail — because Cascade did not have knowledge of the exclusivity provisions, because the suppliers exercised their termination rights lawfully, or because Cascade's conduct was not independently wrongful — then the unlawful prong of the UCL claim necessarily collapses, because there is no predicate violation of law to "borrow." The unlawful prong has no independent vitality apart from the underlying claims on which it is predicated.

Accordingly, our defense of the UCL claim under the unlawful prong is inextricably linked to the defense of the first and second causes of action. If we successfully defeat the tortious interference claims, the unlawful prong falls with them.

C. The "Unfair" Prong

The "unfair" prong of the UCL presents a more complex analytical challenge. There is a recognized split in the California appellate courts regarding the appropriate test for "unfairness" in the context of business-to-business (non-consumer) disputes.

Some courts apply a balancing test, weighing the utility of the defendant's conduct against the gravity of the harm to the plaintiff. Under this approach, a business practice is "unfair" if the harm it causes outweighs its benefits. See Motors, Inc. v. Times Mirror Co. (1980) 102 Cal.App.3d 735, 740. Other courts have adopted a more restrictive standard, requiring that the challenged practice either "threaten[] an incipient violation of an antitrust law, or violate[] the policy or spirit of one of those laws." See Cel-Tech Communications, supra, 20 Cal.4th at 187 (establishing this standard for UCL claims brought by competitors). Under the Cel-Tech standard, which the California Supreme Court adopted in the competitor context, the plaintiff must tether its "unfairness" theory to a specific legislative or regulatory policy.

Aggressive but legitimate competition for suppliers does not ordinarily rise to the level of an "unfair" business practice under either test. Under the balancing test, the utility of robust competition in supplier markets — which benefits consumers by driving down costs and promoting innovation — outweighs the harm to a competitor that loses supplier relationships to a rival offering better terms. Under the Cel-Tech standard, Vantor would need to identify a specific antitrust law or policy that Cascade's conduct threatens to violate, and the complaint does not articulate any such theory.

Cascade's conduct — offering superior commercial terms to willing suppliers in arm's-length negotiations — is the essence of market competition. It would be a remarkable extension of the UCL to classify such conduct as an "unfair" business practice.

D. Preemption / Duplication Defense

A key defense argument with respect to the UCL claim is that it is duplicative of the tortious interference claims and does not allege any independently actionable conduct beyond what is already alleged in the first two causes of action. The UCL claim adds nothing to Vantor's case; it merely repackages the same factual allegations under a different legal label.

California courts have recognized that the UCL should not be used as a vehicle for creating a duplicative cause of action where the same conduct is already the subject of specific tort claims with well-defined elements and defenses. See Cortez v. Purolator Air Filtration Products Co. (2000) 23 Cal.4th 163, 173 (noting the UCL's supplemental nature). While the UCL is broadly drafted, it was not intended to transform every business tort into an unfair competition claim, particularly where doing so would allow a plaintiff to circumvent the specific elements and defenses applicable to the underlying tort.

We recommend raising the duplication defense as an affirmative defense in Cascade's answer and as a basis for a demurrer, motion for judgment on the pleadings, or motion for summary judgment. This is potentially the strongest basis for early disposition of the UCL claim and may be pursued before the resolution of the tortious interference claims.

VI. Available Defenses — Comprehensive Analysis

This section provides a comprehensive analysis of the defenses available to Cascade across all three causes of action. Several of these defenses, if established, are potentially dispositive of one or more claims.

A. Lack of Knowledge of Exclusivity Provisions

As discussed in Section III.C above, Cascade's position is that it did not have actual knowledge of the exclusivity provisions in the Vantor–supplier agreements at the time Cascade executed its own supply agreements with Hemsworth, Tridale, and Orion. This defense is directed at the second element of the tortious interference with contractual relations claim and, if established, is a complete defense to that claim.

The significance of this defense cannot be overstated. Without actual knowledge that the suppliers were subject to exclusivity obligations, Cascade cannot be said to have intentionally interfered with those obligations. At most, Cascade was aware — as any market participant would be — that the suppliers had existing business relationships with other customers, including Vantor. But general awareness of a customer-supplier relationship is categorically different from knowledge that the relationship is governed by an exclusive dealing arrangement.

The 14 internal Project Atlas emails that reference Vantor's supplier relationships must be carefully reviewed to determine what they actually demonstrate. If these emails merely reference Vantor as a customer of the suppliers — for example, noting that "Hemsworth's current customer base includes Vantor" or "we understand that Tridale has an existing relationship with Vantor" — they are insufficient to establish knowledge of the exclusivity terms. Such references are entirely consistent with ordinary competitive intelligence-gathering and do not demonstrate awareness of specific contractual restrictions. On the other hand, if any of the emails specifically reference exclusivity provisions, exclusive supply arrangements, or the notion that the suppliers are "locked in" or "restricted" from dealing with competitors, the knowledge defense becomes more challenging. The analysis of these emails is being undertaken separately by the litigation team, and the results will be critical to the assessment of this defense.

It bears emphasis that the burden of proving knowledge rests on Vantor, not on Cascade. Vantor must affirmatively demonstrate, through competent evidence, that Cascade had actual knowledge of the exclusivity provisions. If the evidence is ambiguous, equivocal, or insufficient to support a finding of actual knowledge, Cascade prevails on this element.

B. Independent Action by Suppliers / No Inducement

Cascade's second major defense is that the suppliers independently chose to enter into supply agreements with Cascade, and that Cascade did not induce or improperly encourage the suppliers to breach their obligations to Vantor. This defense goes to the third element of the tortious interference with contractual relations claim (intentional acts designed to induce breach or disruption) and, as discussed below, also supports the defense on the independently wrongful conduct element of the prospective advantage claim.

The factual basis for this defense is straightforward: Cascade offered the suppliers commercially superior terms — annual purchase commitments that were more than double what Vantor was providing — and the suppliers, exercising their own business judgment, chose to accept those terms. Offering a better deal is the most fundamental form of market competition. It is not tortious inducement. See Imperial Ice Co. v. Rossier, supra, 18 Cal.2d at 36–37.

The testimony of key supplier witnesses will be critical in establishing this defense. We anticipate that the following individuals will be important witnesses:

• Janet Kohler, Chief Executive Officer of Hemsworth Consumer Products LLC, who can testify regarding Hemsworth's independent business rationale for transitioning to Cascade.

• Gregory Fontaine, President of Tridale Manufacturing Inc., who can testify regarding Tridale's independent assessment of the relative commercial attractiveness of the Cascade and Vantor relationships.

• Simone Alvarez, Chief Executive Officer of Orion Lifestyle Brands Corp., who can testify regarding Orion's independent decision-making process in electing to enter the Cascade supply agreement.

To the extent these witnesses confirm that their companies' decisions were driven by the superior commercial terms offered by Cascade — rather than by any improper pressure, threats, or inducement from Cascade — this defense will be substantially strengthened. We recommend that third-party discovery be directed at obtaining documents and testimony from each supplier regarding the decision-making process, and that the deposition strategy prioritize these witnesses.

C. Proper Exercise of Termination-for-Convenience Clauses

As discussed in Section III.E above, if the three suppliers properly exercised their termination-for-convenience clauses — delivering written notice to Vantor within the contractually specified timeframes (90 days for Hemsworth, 60 days for Tridale, and 120 days for Orion) — before entering into their supply agreements with Cascade, then there was no "breach" of the Vantor–supplier agreements, and the first cause of action for tortious interference with contractual relations fails as a matter of law on Element 4.

This defense is potentially the most powerful in Cascade's arsenal because it goes to the heart of the contractual interference claim: without a breach, there is no tortious interference. The lawful exercise of a contractual termination right is not a breach. A party that does what its contract allows it to do has not breached the contract, regardless of the reason it chose to exercise its right.

The timeline of events is important:

• Hemsworth: The Cascade–Hemsworth agreement was executed on June 1, 2021. If Hemsworth delivered a 90-day termination notice to Vantor on or before that date, the termination would have been effective approximately August 30, 2021 — well before the March 14, 2022, expiration date.

• Tridale: The Cascade–Tridale agreement was executed on August 15, 2021. If Tridale delivered a 60-day termination notice to Vantor on or before that date, the termination would have been effective approximately October 14, 2021 — before the January 9, 2022, expiration date.

• Orion: The Cascade–Orion agreement was executed on May 10, 2021. If Orion delivered a 120-day termination notice to Vantor on or before that date, the termination would have been effective approximately September 7, 2021 — well before the June 30, 2022, expiration date.

Discovery must be directed at confirming whether and when each supplier delivered its termination notice to Vantor, and whether the notice complied with the contractual requirements (written form, proper addressee, etc.). If the termination notices were properly delivered, this defense is dispositive of the first cause of action.

D. Failure to Mitigate Damages

Under California law, a plaintiff has an affirmative duty to take reasonable steps to mitigate its damages. See Valle de Oro Bank v. Gamboa (1994) 26 Cal.App.4th 1686, 1691 ("The doctrine of avoidable consequences or mitigation of damages prevents recovery for damages which could have been avoided by reasonable effort and expenditure."). A plaintiff who fails to mitigate may not recover damages that could have been avoided through the exercise of reasonable diligence.

Cascade will argue that Vantor failed to mitigate its damages by failing to take reasonable steps to identify and secure replacement suppliers following the loss of its relationships with Hemsworth, Tridale, and Orion. The consumer goods supply market is competitive, and there are numerous potential suppliers in the home goods, consumer electronics accessories, and personal care product categories. Vantor's failure to pursue alternative supply arrangements — if established through discovery — would significantly reduce or potentially eliminate its recoverable damages.

Cascade's anticipated expert analysis is expected to demonstrate that a 40% to 55% reduction in any damages figure is warranted based on Vantor's failure to mitigate. This analysis will take into account the availability of alternative suppliers in each product category, the time required to establish new supply relationships, and the revenue that Vantor could reasonably have generated through replacement supplier arrangements.

We recommend that discovery be focused on this issue, including interrogatories and document requests directed at identifying what steps, if any, Vantor took to secure replacement suppliers following the termination of each of the three agreements. Deposition testimony from Vantor's procurement and supply chain personnel will also be important.

E. Terminability of Contracts Limits Damages

Even if liability is established on one or more of the tortious interference claims, the measure of Vantor's recoverable damages is constrained by the terminability of the exclusive supply agreements. Because each agreement contained a termination-for-convenience clause, Vantor's expectation of continued revenue from these relationships was limited to the remaining term of each agreement.

The remaining terms at the time of the relevant Cascade agreements were:

Vantor's claimed damages of $87.4 million are based on projected multi-year revenue streams that extend far beyond the existing contract terms. This methodology is fundamentally flawed as a matter of law. Where a contract is terminable at the convenience of either party upon notice, the plaintiff's expected future benefit is limited to the remaining term of the contract, reduced by the applicable notice period. Projecting revenue streams years into the future — based on the speculative assumption that the supplier relationships would have continued indefinitely — does not satisfy California's requirement of "reasonable certainty" in proving lost profits. See GHK Associates, supra, 224 Cal.App.3d at 873.

Based on the remaining contract terms and the annual purchase commitments under the Vantor–supplier agreements, we estimate that Vantor's provable damages range is approximately $6.1 million to $11.3 million — a fraction of the $87.4 million claimed. This range accounts for the remaining contract terms, the minimum annual purchase commitments, and reasonable assumptions about profit margins, but does not include speculative projections beyond the existing contract terms. The retention of a forensic economics expert will be important in developing this damages limitation argument.

F. Section 17200 Claim Is Duplicative / Preempted

As discussed in Section V.D above, the UCL claim is duplicative of the tortious interference claims and does not allege any independently actionable conduct beyond what is already the subject of the first two causes of action. We recommend that this defense be raised as an affirmative defense in the answer, and that it serve as the basis for an early motion for judgment on the pleadings or motion for summary judgment. The legal authority supporting this position is well-established, and the motion should be filed at the earliest appropriate stage.

G. Privilege / Justification Defense

California recognizes a limited privilege or justification defense to tortious interference claims. Under this defense, a defendant may assert that its conduct, even if it interfered with the plaintiff's contractual or prospective economic relationships, was justified by a legitimate business interest. See Richardson v. La Rancherita (1979) 98 Cal.App.3d 73, 80–81; Restatement (Second) of Torts § 767 (listing factors relevant to the justification analysis, including the nature of the defendant's conduct, the defendant's motive, and the interest sought to be advanced).

Cascade's Project Atlas initiative was a bona fide strategic initiative to diversify its supplier network across key product categories. Supplier diversification is a widely recognized and legitimate business objective that serves to reduce supply chain risk, improve product quality and range, and enhance competitive positioning. The decision to pursue relationships with Hemsworth, Tridale, and Orion was driven by Cascade's legitimate business need to expand its supply base — not by any desire to harm Vantor or to disrupt Vantor's business.

Competing for suppliers is a recognized legitimate business interest in a free-market economy. California law does not require a competitor to refrain from pursuing commercially attractive supplier relationships merely because those suppliers have existing relationships with a rival. The privilege or justification defense reinforces the broader theme of Cascade's defense: that Cascade engaged in ordinary, arm's-length commercial competition, and that the suppliers independently chose to enter into new relationships offering superior terms.

This defense is stronger with respect to the prospective economic advantage claim (where the independently wrongful conduct requirement already poses a significant obstacle for Vantor) than with respect to the contractual interference claim, but it is relevant to both. We recommend that the justification defense be asserted in the answer and developed through discovery.

VII. Procedural Considerations

A. Demurrer vs. Answer

We have considered whether to file a demurrer to any of the three causes of action in lieu of, or in addition to, filing an answer. A demurrer challenges the legal sufficiency of the complaint on its face and, if sustained, may result in dismissal of one or more causes of action (with or without leave to amend).

After careful consideration, we recommend proceeding directly with an answer and affirmative defenses — which are already in preparation for filing on October 18, 2021 — rather than filing a demurrer. The primary reason for this recommendation is that the factual questions at the heart of Cascade's defenses — particularly regarding Cascade's knowledge of the exclusivity provisions and the suppliers' exercise of their termination-for-convenience rights — are not amenable to resolution on a demurrer, which is limited to the four corners of the complaint. Vantor's complaint, while we believe it is ultimately insufficient, alleges facts that, if taken as true for purposes of a demurrer, might survive demurrer on the tortious interference claims.

The more effective strategy is to develop the factual record through targeted discovery and then pursue dispositive motions — motions for judgment on the pleadings or motions for summ

MEMORANDUM
PRIVILEGED & CONFIDENTIAL — ATTORNEY WORK PRODUCT
TO: Yuki Nakamura, Senior Associate
FROM: Carlos Espinoza, Associate
DATE: October 8, 2021
RE: California Tortious Interference Law — Elements and Defenses
MATTER: Vantor Holdings Corp. v. Cascade Retail Holdings Inc., Case No. 21STCV-34872 (Superior Court of California, County of Los Angeles)
MATTER NO.: 1038-00007
CLIENT: Cascade Retail Holdings Inc.
I. Introduction and Purpose
The purpose of this memorandum is to provide a comprehensive analysis of California tortious interference law as it applies to the claims asserted by Vantor Holdings Corp. ("Vantor") against our client, Cascade Retail Holdings Inc. ("Cascade"), in the above-referenced action. This memorandum is intended to serve as a foundational analytical resource for the defense team as we finalize Cascade's answer and affirmative defenses and develop the broader litigation strategy.
Vantor filed its complaint on September 7, 2021, in the Superior Court of California, County of Los Angeles, asserting three causes of action: (1) tortious interference with contractual relations; (2) tortious interference with prospective economic advantage; and (3) unfair business practices under California Business and Professions Code Section 17200 et seq. The complaint names Cascade as the sole defendant.
At the core of Vantor's allegations is the contention that Cascade systematically induced three of Vantor's key consumer-goods suppliers — Hemsworth Consumer Products LLC ("Hemsworth"), Tridale Manufacturing Inc. ("Tridale"), and Orion Lifestyle Brands Corp. ("Orion") — to breach exclusive supply agreements with Vantor, thereby causing Vantor alleged damages of approximately $87.4 million. Vantor characterizes Cascade's conduct as a deliberate and coordinated "campaign" to strip Vantor of its most valuable supplier relationships, allegedly in furtherance of Cascade's internal strategic initiative known as "Project Atlas."
Cascade's answer and affirmative defenses are currently being prepared for filing on October 18, 2021. This memorandum is intended to inform the substantive defense strategy by identifying the elements of each cause of action, surveying the leading California precedent governing those elements, and evaluating the available defenses as applied to the facts currently known to us. The analysis contained herein is based on the allegations set forth in Vantor's complaint, Cascade's internal documents produced to date (including Project Atlas files), and the relevant contractual provisions of the exclusive supply agreements as described in the complaint and its exhibits.
This memorandum will address each of Vantor's three causes of action in turn, analyze the required elements under governing California law, survey leading judicial precedent, and assess the viability and strength of the defenses available to Cascade. The memorandum concludes with recommendations for the defense strategy, including discovery priorities, dispositive motion opportunities, and expert retention considerations.
II. Factual Background Relevant to Legal Analysis
The following factual summary is drawn from the allegations in Vantor's complaint, the exhibits attached thereto, and Cascade's internal records reviewed to date. This background provides the necessary factual context for the legal analysis that follows. We note that the factual record will continue to develop as discovery proceeds, and certain key factual questions remain unresolved at this stage.
A. The Vantor–Supplier Exclusive Supply Agreements
Vantor is a California-based consumer-goods holding company that, through its various subsidiaries, distributes a range of consumer products through retail and e-commerce channels. According to the complaint, Vantor maintained exclusive supply agreements with three suppliers that are central to this dispute:
Orion Lifestyle Brands Corp. Orion is a California corporation engaged in the manufacture and distribution of personal care and wellness products. Vantor and Orion entered into a four-year exclusive supply agreement executed on July 1, 2018, with an expiration date of June 30, 2022. The agreement provided for a minimum annual purchase commitment by Vantor of $14.6 million. Notably, the agreement contained a termination-for-convenience clause permitting either party to terminate the agreement upon 120 days' written notice to the other party. The exclusivity provision, as described in the complaint, prohibited Orion from supplying specified product categories to any competitor of Vantor in defined geographic markets during the term of the agreement.
Hemsworth Consumer Products LLC. Hemsworth is an Oregon limited liability company engaged in the manufacture of home goods and kitchen accessories. Vantor and Hemsworth entered into a three-year exclusive supply agreement executed on March 15, 2019, with an expiration date of March 14, 2022. The agreement provided for a minimum annual purchase commitment by Vantor of $12.5 million. The termination-for-convenience clause in the Hemsworth agreement permitted either party to terminate upon 90 days' written notice. As with the Orion agreement, the exclusivity provision restricted Hemsworth from supplying specified product lines to Vantor's competitors during the term.
Tridale Manufacturing Inc. Tridale is a Nevada corporation engaged in the manufacture of consumer electronics accessories. Vantor and Tridale entered into a two-year exclusive supply agreement executed on January 10, 2020, with an expiration date of January 9, 2022. The agreement provided for a minimum annual purchase commitment by Vantor of $8.3 million. The termination-for-convenience clause permitted either party to terminate upon 60 days' written notice. The exclusivity provision mirrored those in the other two agreements in material respects.
A critical feature of all three agreements, as discussed in detail below, is the inclusion of termination-for-convenience clauses that permitted either party — including the suppliers — to terminate the agreements upon specified notice periods without cause. The legal significance of these provisions cannot be overstated, as they bear directly on the questions of whether a "breach" occurred and on the measure of any recoverable damages.
B. Cascade's Project Atlas and New Supply Agreements
In February 2021, Cascade launched an internal strategic initiative designated "Project Atlas." According to Cascade's internal documents, Project Atlas was a supplier diversification initiative designed to expand and strengthen Cascade's supply base across several key product categories, including home goods, consumer electronics accessories, and personal care products. The initiative was led by Annika Bergström, Vice President of Strategic Sourcing, who reported to Lena Torvik, Senior Vice President of Supply Chain and Procurement. Cascade allocated a budget of approximately $4.2 million for supplier transition costs associated with Project Atlas, including onboarding expenses, logistics integration, and initial marketing support.
The complaint alleges — and Cascade's records confirm — that Cascade entered into new supply agreements with each of the three suppliers at issue:
• Cascade–Orion Supply Agreement: Executed May 10, 2021. Four-year term. Annual purchase commitment of $31.0 million — more than double Vantor's $14.6 million annual commitment under the existing Vantor–Orion agreement.
• Cascade–Hemsworth Supply Agreement: Executed June 1, 2021. Five-year term. Annual purchase commitment of $28.0 million — more than double Vantor's $12.5 million annual commitment under the existing Vantor–Hemsworth agreement.
• Cascade–Tridale Supply Agreement: Executed August 15, 2021. Three-year term. Annual purchase commitment of $19.5 million — more than double Vantor's $8.3 million annual commitment under the existing Vantor–Tridale agreement.
Vantor contends that these agreements were the product of Cascade's deliberate campaign to induce the suppliers to breach their exclusivity obligations to Vantor. Cascade's position, as discussed in detail below, is that these agreements reflect ordinary, arm's-length commercial negotiations with willing suppliers who independently determined that the Cascade relationships offered superior commercial terms and independently exercised their contractual termination rights.
C. Key Factual Questions for Legal Analysis
Several factual questions are critical to the legal analysis and remain subject to further development through discovery:
First, whether Cascade had actual knowledge of the exclusivity provisions in the Vantor–supplier agreements at the time Cascade entered into its own agreements with the suppliers. As discussed below, this is a threshold element of the tortious interference with contractual relations claim, and Cascade's position is that it lacked such knowledge. However, Vantor's complaint points to communications during the Project Atlas process that allegedly demonstrate awareness of the Vantor–supplier relationships. Our preliminary review has identified 14 internal Project Atlas emails (out of a total of 2,847 Project Atlas-related emails) that reference Vantor's existing supplier relationships. These emails are being reviewed separately and in detail by the litigation team to assess what, if anything, they demonstrate about Cascade's knowledge of the specific contractual terms — including exclusivity provisions — of the Vantor–supplier agreements.
Second, whether the three suppliers independently exercised their termination-for-convenience clauses before entering into their agreements with Cascade. If the suppliers properly terminated their agreements with Vantor in accordance with the contractual notice provisions, then there was no "breach" of the Vantor–supplier agreements, and Vantor's first cause of action for tortious interference with contractual relations fails as a matter of law with respect to Element 4.
Third, whether Cascade employed any independently wrongful conduct or improper means — such as fraud, misrepresentation, threats, or economic duress — in securing the new supplier relationships. This question is particularly relevant to the second cause of action for tortious interference with prospective economic advantage, which requires proof of "independently wrongful" conduct. A preliminary review of the complaint and Cascade's internal records does not reveal any allegation or evidence of such conduct.
Fourth, the nature and scope of Vantor's mitigation efforts following the loss of the supplier relationships. Under California law, a plaintiff has a duty to take reasonable steps to mitigate its damages, and Vantor's failure to do so — if established — would reduce or eliminate recoverable damages. Discovery will need to focus on the steps, if any, that Vantor undertook to identify and secure replacement suppliers following the termination of the three agreements.
III. Tortious Interference with Contractual Relations (First Cause of Action)
A. Elements Under California Law
California has long recognized the tort of intentional interference with contractual relations. The tort protects a party's interest in the stability and performance of existing contracts against unjustified interference by third parties. Under California law, a plaintiff asserting a claim for tortious interference with contractual relations must prove each of the following five elements:
1. The existence of a valid contract between the plaintiff and a third party;
2. The defendant's knowledge of the contract;
3. The defendant's intentional acts designed to induce a breach or disruption of the contractual relationship;
4. An actual breach or disruption of the contractual relationship; and
5. Resulting damage to the plaintiff.
See Harborview Industries (1990) 50 Cal.3d 1118, 1126; Camberwell Corporation (1998) 19 Cal.4th 26, 55; Restatement (Second) of Torts § 766 (1979). California courts have consistently adopted and applied the framework set forth in the Restatement (Second) of Torts in analyzing tortious interference claims. See della Penna v. Crowne Albany Industries (1995) 11 Cal.4th 376, 392–93.
It is important to note at the outset that California recognizes tortious interference with contractual relations as an intentional tort. Negligent interference with contractual relations is generally not actionable under California law. See Applied Equipment Corp. v. Litton Saudi Arabia Ltd. (1994) 7 Cal.4th 503, 514 (distinguishing intentional from negligent interference and confirming that only the former is recognized). The plaintiff must demonstrate that the defendant acted with the intent to disrupt the contractual relationship — not merely that the defendant intended the act that incidentally caused a disruption. This requirement of specific intent is central to the analysis and, as discussed below, interacts with the knowledge and inducement elements in significant ways.
Each of the five elements is analyzed below as applied to the facts of this case.
B. Element 1: Existence of a Valid Contract
The first element requires Vantor to prove the existence of valid, enforceable contracts between Vantor and the three supplier third parties — Hemsworth, Tridale, and Orion — at the time of the alleged interference. Based on the information currently available, it appears that this element is likely satisfied. The exclusive supply agreements between Vantor and each of the three suppliers were executed in writing, contained definite terms (including pricing, duration, minimum purchase commitments, and exclusivity provisions), and were supported by adequate consideration. We are not aware, at this time, of any basis to challenge the validity or enforceability of the agreements themselves.
However, a significant analytical issue arises from the inclusion of termination-for-convenience clauses in each of the three agreements. As noted above, each agreement permitted either party to terminate the agreement upon specified notice periods: 90 days for Hemsworth, 60 days for Tridale, and 120 days for Orion. Under California law, a contract that is terminable at will or upon notice remains a valid and enforceable contract for purposes of the first element of a tortious interference claim. See Blank v. Kirwan (1985) 39 Cal.3d 311, 331; Restatement (Second) of Torts § 766, cmt. g (noting that "the fact that the contract is terminable at will does not prevent the existence of a valid contract" for interference purposes). Accordingly, the terminability of the agreements does not defeat the first element.
That said, the terminability of the contracts has significant implications for both the interference analysis and the damages analysis. As discussed in greater detail below, if the suppliers were contractually entitled to terminate their agreements with Vantor upon notice — and did in fact exercise that right — then the question arises whether there was an actual "breach" at all (Element 4), and the measure of any recoverable damages is necessarily constrained to the remaining contract term, minus any periods covered by proper termination notice.
Additionally, the enforceability of the exclusivity provisions themselves merits attention. Exclusive dealing arrangements are generally enforceable under California contract law, provided they do not constitute unreasonable restraints of trade. See Tampa Bay Shipbuilding & Repair Co. v. Cedar Shipping Co., Ltd. (11th Cir. 2003) 320 F.3d 1213, 1225 (applying analogous principles). We do not currently anticipate that the exclusivity provisions in these agreements would be found unenforceable as unreasonable restraints, given their limited duration and defined scope, but this issue should be monitored as additional facts develop.
In summary, Element 1 is likely satisfied with respect to all three supplier agreements, and we do not recommend challenging this element as a primary defense strategy.
C. Element 2: Knowledge of the Contract
The second element — the defendant's knowledge of the plaintiff's contract — is a critical component of Cascade's defense and warrants careful analysis.
Under California law, a plaintiff must prove that the defendant had actual knowledge of the existence of the contract at the time of the alleged interference. Constructive or imputed knowledge is generally insufficient. See Camberwell Corporation, supra, 19 Cal.4th at 56 ("The plaintiff must show that the defendant knew of the existence of the contractual relationship."); PMC, Inc. v. Saban Entertainment, Inc. (1996) 45 Cal.App.4th 579, 603 (holding that "knowledge means actual knowledge, not constructive knowledge"). This requirement serves a critical gatekeeper function: it ensures that liability for tortious interference attaches only where the defendant acted with awareness that its conduct would interfere with an existing contractual obligation, rather than where the defendant merely engaged in ordinary competitive behavior without knowledge of any contractual entanglement.
A significant question arises regarding the level of specificity required for the "knowledge" element. California courts have not uniformly articulated whether the defendant must know the specific terms of the contract — including, in this case, the exclusivity provisions — or whether general awareness that the plaintiff has "some kind of relationship" with the third party suffices. The better view, supported by the Restatement and the weight of California authority, is that the defendant must have sufficient knowledge to understand that its conduct would interfere with a specific contractual obligation. See Restatement (Second) of Torts § 766, cmt. i ("It is not necessary, however, that the actor appreciate the legal significance of the facts giving rise to the contractual duty … It is enough that he knows those facts that give rise to the contractual duty."). Mere awareness that a competitor has a "relationship" with a supplier, without knowledge that the relationship includes exclusivity obligations, is arguably insufficient to establish the knowledge element for a tortious interference with exclusivity claim. The interference must be with the specific contractual terms alleged to have been breached.
Application to the facts: Cascade's position is that it did not have actual knowledge of the exclusivity provisions in Vantor's supply agreements at the time Cascade entered into its own agreements with Hemsworth, Tridale, and Orion. Cascade was aware that these suppliers had existing business relationships with various customers, as would be expected in the ordinary course of commerce, but Cascade contends that it was not aware of the specific terms — and in particular the exclusivity restrictions — contained in the Vantor–supplier agreements.
This defense is subject to challenge based on the internal Project Atlas communications. As noted above, our preliminary review has identified 14 internal emails (out of 2,847 total Project Atlas-related emails) that reference Vantor's existing supplier relationships. These emails are being carefully reviewed by the litigation team. The critical question is whether these emails demonstrate that Cascade personnel had actual knowledge of the exclusivity provisions, or whether they merely reflect general awareness that the suppliers had existing customer relationships (which would not be sufficient). If the emails merely reference Vantor as a current customer of the suppliers — e.g., noting that "Hemsworth currently supplies Vantor" — without any indication that the Cascade team understood the arrangements to be exclusive, they are insufficient to establish the knowledge element. On the other hand, if any of the emails reference the exclusivity terms specifically, or reflect an awareness that the suppliers were contractually restricted from dealing with Vantor's competitors, the knowledge defense becomes more difficult to sustain.
It is also important to note that the burden of proof rests squarely on Vantor to prove Cascade's knowledge. Cascade does not bear the burden of proving that it lacked knowledge. This allocation of the burden of proof is significant because it means that if the evidence on the knowledge question is ambiguous or equivocal, Cascade should prevail on this element.
We recommend that the defense team prioritize the review and analysis of the 14 identified emails as a matter of urgency, and that discovery be directed at identifying any additional communications — whether internal to Cascade or exchanged with the suppliers — that bear on the knowledge question.
D. Element 3: Intentional Acts Designed to Induce Breach or Disruption
The third element requires Vantor to prove that Cascade committed intentional acts designed to induce a breach or disruption of the Vantor–supplier contractual relationships. This element implicates the fundamental distinction between legitimate competitive activity and tortious conduct.
Under California law, the defendant must have intended to disrupt the plaintiff's contractual relationship — not merely intended the act itself that may have had the incidental effect of disrupting the relationship. See Quelimane Co., supra, 19 Cal.4th at 55–56. The intent requirement is specific: the defendant must have acted with the purpose of causing a breach or disruption, or with knowledge that a breach or disruption was substantially certain to result from the defendant's conduct.
California courts have consistently recognized that the mere act of offering a better deal to a contracting party is not, in itself, tortious. "Competition for business is not actionable as tortious interference with contractual relations, even if the competition results in a party's decision to terminate an existing contract." See Imperial Ice Co. v. Rossier (1941) 18 Cal.2d 33, 36–37 (recognizing that legitimate competition is a defense to tortious interference). The law does not require a competitor to refrain from making attractive offers to potential suppliers or customers merely because those suppliers or customers have existing contractual relationships with a rival. Such a rule would stifle competition and chill ordinary business activity.
The critical distinction is between (a) offering superior terms in the marketplace, which is legitimate competitive conduct, and (b) actively and intentionally inducing a contracting party to breach its existing obligations, which may be tortious. The former is permissible even if the competitor knows that the other party has an existing contract. The latter requires some affirmative act of inducement — persuasion, encouragement, or facilitation directed at causing the breach — beyond the mere presentation of a better commercial opportunity.
Additionally, the question of "improper means" is relevant to this element. Where a defendant employs improper means — such as threats, fraud, misrepresentation, economic duress, or other independently tortious conduct — to induce a breach, the inference of tortious intent is significantly strengthened. Conversely, where a defendant merely enters into arm's-length negotiations and offers commercially superior terms, the inference of tortious intent is weak or nonexistent.
Application to the facts: Cascade entered into supply agreements with Hemsworth, Tridale, and Orion that offered substantially higher annual purchase commitments than Vantor's existing agreements:
The disparity in financial terms is significant and provides a straightforward commercial explanation for the suppliers' decisions to transition their business to Cascade. Cascade's offering of superior terms is quintessentially competitive behavior. Vantor's complaint does not allege — and we are not aware of any evidence suggesting — that Cascade employed any improper means such as threats, fraud, misrepresentation, or economic duress in securing these agreements. The complaint characterizes Cascade's conduct as a "systematic campaign to poach" Vantor's suppliers, but this characterization, without more, does not transmute legitimate competitive activity into tortious inducement.
Cascade's position is that it engaged in ordinary competitive bidding for supplier relationships and that the suppliers independently chose to enter into the Cascade agreements based on the commercially superior terms offered. This position is well-supported by California precedent, which holds that offering a better deal is a hallmark of competition, not of tortious interference.
We note, however, that the fact-finder's assessment of this element may turn on the totality of the circumstances, including the timing and sequence of Cascade's outreach to the suppliers, the content of communications between Cascade personnel and supplier representatives, and whether Cascade took any affirmative steps to encourage the suppliers to breach (as opposed to terminate) their existing agreements with Vantor. These are questions that will be developed through discovery, and we recommend that Cascade's document review and witness preparation focus on establishing that Cascade's communications with the suppliers were limited to ordinary commercial negotiations and did not include any encouragement to breach the Vantor agreements.
E. Element 4: Actual Breach or Disruption
The fourth element requires Vantor to prove that an actual breach or disruption of the Vantor–supplier contractual relationships occurred. This element presents one of Cascade's strongest defenses.
Vantor's complaint alleges that the three suppliers "breached" their exclusive supply agreements with Vantor by entering into competing supply agreements with Cascade. However, a critical factual question — which must be resolved through discovery — is whether the suppliers exercised their termination-for-convenience clauses before entering into the Cascade agreements. If the suppliers properly terminated their agreements with Vantor by providing the requisite notice (90 days for Hemsworth, 60 days for Tridale, and 120 days for Orion), then there was no "breach" of the Vantor–supplier agreements. A lawful exercise of a contractual termination right is not a breach of contract — it is the exercise of a right expressly granted by the contract itself.
The weight of California authority supports this distinction. A party cannot "breach" a contract by doing precisely what the contract authorizes the party to do. See Restatement (Second) of Contracts § 235, cmt. b (1981) (performance or tender in accordance with contract terms satisfies the duty). The Restatement (Second) of Torts likewise recognizes this principle in the context of tortious interference: where the third party's conduct is authorized by the terms of the contract, there is no "breach" for purposes of the tortious interference analysis. See Restatement (Second) of Torts § 766, cmt. g.
California appellate courts have addressed this issue in the context of at-will employment and other terminable relationships. In Ixchel Pharma, LLC v. Biogen, Inc. (2020) 9 Cal.5th 1130, the California Supreme Court considered the standards governing tortious interference claims in the context of at-will relationships, and the court's analysis reinforced the principle that a defendant's liability for interference turns on whether the challenged conduct caused a breach of a legally binding obligation, as distinguished from a lawful decision to terminate a voluntary relationship.
Application to the facts: If the record establishes — through discovery of the suppliers' termination notices, communications, and testimony — that each supplier delivered proper written notice of termination to Vantor under the applicable termination-for-convenience clause before executing its supply agreement with Cascade, then Vantor's contractual interference claim fails as a matter of law. There would have been no "breach" of the exclusive supply agreements; there would have been only a lawful termination followed by the formation of new commercial relationships.
This defense is potentially dispositive of the first cause of action and should be a top priority in discovery. We recommend that Cascade issue targeted discovery to each of the three suppliers (through third-party subpoenas) seeking all documents and communications relating to the exercise of termination rights under the Vantor–supplier agreements, including copies of any termination notices delivered to Vantor.
If the suppliers did not properly exercise their termination-for-convenience clauses prior to contracting with Cascade, the analysis becomes more complex, and the breach element would need to be evaluated based on the specific timeline and circumstances of each supplier's transition.
F. Element 5: Resulting Damage
The fifth element requires Vantor to prove that it suffered damage as a result of the alleged tortious interference. Vantor claims total damages of approximately $87.4 million, broken down as follows:
According to the complaint, these figures are based on projected multi-year revenue streams attributable to the supplier relationships, discounted to present value at a rate of 8.5%. Vantor has retained Meridian Forensic Economics LLC, with Dr. Harold Pryce serving as the designated expert, to support its damages methodology. Cascade is currently evaluating the retention of its own forensic economics expert to rebut Vantor's damages analysis.
At this stage, the damages element raises a significant legal question: whether Vantor's claimed damages are too speculative to be recoverable as a matter of law. Under California law, damages for lost profits must be proved with "reasonable certainty." See GHK Associates v. Mayer Group, Inc. (1990) 224 Cal.App.3d 856, 873 ("Damages which are speculative, remote, imaginary, contingent, or merely possible cannot serve as a legal basis for recovery."). A plaintiff cannot recover damages based on speculative projections of revenue streams that were never guaranteed and that depended on the continued performance of contracts containing termination-for-convenience clauses.
Vantor's claimed damages of $87.4 million appear to extend well beyond the remaining terms of the existing supply agreements. Given that each agreement contained a termination-for-convenience clause, Vantor's expectation that the supplier relationships would continue indefinitely (or be renewed) was inherently uncertain. As discussed in greater detail in Section VI.E below, the provable damages range — based on the remaining contract terms at the time of the alleged breach — is estimated at approximately $6.1 million to $11.3 million, a fraction of Vantor's $87.4 million claim.
The damages analysis is largely an expert question and will be developed through expert discovery. However, the legal argument that Vantor's damages methodology is flawed — because it projects revenue streams far beyond the remaining contract terms of terminable-at-convenience agreements — should be preserved and asserted at the summary judgment stage.
IV. Tortious Interference with Prospective Economic Advantage (Second Cause of Action)
A. Elements Under California Law
Vantor's second cause of action asserts tortious interference with prospective economic advantage. This tort protects a party's interest in prospective economic relationships — relationships that have not yet ripened into binding contracts — from unjustified interference by third parties. The tort is distinct from tortious interference with contractual relations in several important respects, the most significant of which is the requirement that the defendant's conduct be "independently wrongful."
Under California law, a plaintiff asserting a claim for tortious interference with prospective economic advantage must prove each of the following five elements:
1. An economic relationship between the plaintiff and a third party, with the probability of future economic benefit to the plaintiff;
2. The defendant's knowledge of the relationship;
3. The defendant engaged in independently wrongful conduct;
4. The independently wrongful conduct disrupted the relationship; and
5. Resulting damage to the plaintiff.
See Glenrock Corporation (2003) 29 Cal.4th 1134, 1153; della Penna v. Crowne Albany Industries (1995) 11 Cal.4th 376, 392–93; Ixchel Pharma, LLC v. Biogen, Inc. (2020) 9 Cal.5th 1130, 1141. The California Supreme Court has emphasized the distinction between this tort and the tort of interference with existing contractual relations, particularly with respect to the third element — the requirement of independently wrongful conduct — which imposes a higher burden on plaintiffs claiming interference with prospective, as opposed to existing, contractual relationships. See della Penna, supra, 11 Cal.4th at 392–93 (adopting the independently wrongful conduct requirement to prevent the tort from becoming "a means for casting a chill on ordinary competitive behavior").
B. The "Independently Wrongful Conduct" Requirement
The independently wrongful conduct requirement is the most significant distinction between this tort and the tort of interference with existing contractual relations, and it represents a critical defense opportunity for Cascade.
Under California law, a plaintiff claiming tortious interference with prospective economic advantage must prove that the defendant's conduct was "independently wrongful" — that is, wrongful apart from the interference itself. The California Supreme Court has explained that this requirement ensures that mere competitive conduct — even aggressive competition — does not give rise to liability for tortious interference. See della Penna, supra, 11 Cal.4th at 393 ("It is not enough that the defendant's conduct was intentional and that the plaintiff was thereby deprived of a prospective economic advantage. Something more is required."); Korea Supply Co., supra, 29 Cal.4th at 1158–59.
To satisfy the independently wrongful conduct requirement, the plaintiff must demonstrate that the defendant's conduct was independently actionable — meaning it would be actionable as a violation of a statute, regulation, or recognized legal duty, or would constitute conduct that is independently tortious, such as fraud, misrepresentation, threats, defamation, or violation of an established common-law standard. See Ixchel Pharma, supra, 9 Cal.5th at 1142 (clarifying that "an act is independently wrongful if it is unlawful, that is, if it is proscribed by some constitutional, statutory, regulatory, common law, or other determinable legal standard"). The court in Ixchel Pharma further clarified that this standard applies uniformly and that a plaintiff cannot satisfy the independently wrongful conduct requirement by merely characterizing competitive behavior in pejorative terms.
Application to the facts: Vantor's complaint alleges that Cascade engaged in a "systematic campaign" to "poach" Vantor's suppliers, and that this conduct constitutes independently wrongful activity. However, the complaint does not identify any specific statute, regulation, or recognized legal duty that Cascade's conduct violated. Nor does the complaint allege that Cascade employed fraud, misrepresentation, threats, economic duress, or any other independently tortious means in its dealings with the suppliers. The complaint's characterization of Cascade's conduct as "systematic" does not, in itself, transform ordinary competitive behavior into independently wrongful conduct. Every successful business strategy is, by its nature, systematic.
Cascade's position is compelling on this element: entering into supply agreements with willing suppliers who independently chose to terminate their prior arrangements and enter into new, commercially superior relationships with Cascade is classic competitive behavior. It is the very type of conduct that the California Supreme Court sought to protect from tort liability when it adopted the independently wrongful conduct requirement in della Penna. Absent evidence that Cascade employed improper means — fraud, threats, misrepresentation, bribery, or similar conduct — Vantor cannot satisfy this element as a matter of law.
C. The "Probability of Future Economic Benefit" Requirement
The first element of this tort requires Vantor to demonstrate that there existed an economic relationship between Vantor and the suppliers with the "probability of future economic benefit" to Vantor. This requires more than a mere hope or expectation of future dealings; there must have been a reasonable probability that the supplier relationships would have continued or been renewed beyond their existing contractual terms.
The termination-for-convenience clauses in the Vantor–supplier agreements significantly undermine Vantor's ability to establish this element. If the suppliers could terminate their agreements with Vantor at any time upon relatively short notice (60, 90, or 120 days), Vantor's expectation that these relationships would continue indefinitely — or would be renewed upon expiration — was inherently uncertain. A party cannot claim a "reasonable probability" of continued economic benefit from a relationship that the counterparty is contractually entitled to terminate at will.
Moreover, the remaining contract terms at the time Cascade executed its agreements with the suppliers were relatively short:
The probability that these relationships would have been renewed beyond their existing terms is speculative at best, particularly given that the suppliers demonstrated their willingness to transition to a competitor offering substantially better terms. The very fact that the suppliers chose to move to Cascade undercuts Vantor's argument that there was a "reasonable probability" of continued economic benefit from the Vantor–supplier relationships.
D. Application to This Case — Summary Assessment
The prospective economic advantage claim is potentially the weakest of Vantor's three causes of action, primarily because of the independently wrongful conduct requirement. Vantor's complaint does not allege — and we are not aware of any evidence that would support — a finding that Cascade engaged in independently wrongful conduct beyond the act of competing for supplier relationships in the marketplace.
We recommend that Cascade consider filing a motion for summary judgment on this claim at the appropriate time, arguing that Vantor cannot meet the independently wrongful conduct standard as a matter of law. Given the California Supreme Court's clear articulation of this standard in della Penna, Korea Supply Co., and Ixchel Pharma, and the absence of any allegation of fraud, threats, or other improper conduct, this motion has a strong likelihood of success. The motion should be timed to follow targeted discovery on the question of whether any independently wrongful conduct occurred, so that the evidentiary record fully supports the motion.
V. Unfair Business Practices — Cal. Bus. & Prof. Code § 17200 (Third Cause of Action)
A. Elements of a Section 17200 Claim
Vantor's third cause of action is brought under California Business and Professions Code Section 17200 et seq., commonly known as the Unfair Competition Law ("UCL"). Section 17200 defines "unfair competition" broadly to include "any unlawful, unfair or fraudulent business act or practice." The statute provides for both public and private enforcement, though private enforcement is subject to standing requirements enacted by Proposition 64 in 2004.
The UCL establishes three alternative prongs under which a plaintiff may proceed: the "unlawful" prong, the "unfair" prong, and the "fraudulent" prong. A plaintiff need only establish a violation under one prong to prevail. Based on the allegations in Vantor's complaint, Vantor appears to proceed primarily under the "unfair" prong and potentially under the "unlawful" prong. The complaint does not appear to assert a viable theory under the "fraudulent" prong, as it does not allege any fraud, deception, or misrepresentation by Cascade.
As a threshold matter, Vantor must satisfy the standing requirements imposed by Proposition 64. Under Business and Professions Code Section 17204, a private plaintiff must demonstrate that it has "suffered injury in fact and [has] lost money or property as a result of the unfair competition." See Kwikset Corp. v. Superior Court (2011) 51 Cal.4th 310, 322–23. Vantor alleges lost revenue and profits as a result of Cascade's conduct, which likely satisfies the standing requirement, though the causal connection between Cascade's alleged unfair practices and Vantor's injury will need to be established.
B. The "Unlawful" Prong
The "unlawful" prong of the UCL "borrows" violations of other laws — including statutes, regulations, and common-law duties — and treats them as independently actionable unfair business practices under Section 17200. See Cel-Tech Communications, Inc. v. Los Angeles Cellular Telephone Co. (1999) 20 Cal.4th 163, 180. The unlawful prong essentially provides an additional remedy for conduct that independently violates some other legal standard.
The derivative nature of the unlawful prong is critical to the analysis. If the underlying tortious interference claims fail — because Cascade did not have knowledge of the exclusivity provisions, because the suppliers exercised their termination rights lawfully, or because Cascade's conduct was not independently wrongful — then the unlawful prong of the UCL claim necessarily collapses, because there is no predicate violation of law to "borrow." The unlawful prong has no independent vitality apart from the underlying claims on which it is predicated.
Accordingly, our defense of the UCL claim under the unlawful prong is inextricably linked to the defense of the first and second causes of action. If we successfully defeat the tortious interference claims, the unlawful prong falls with them.
C. The "Unfair" Prong
The "unfair" prong of the UCL presents a more complex analytical challenge. There is a recognized split in the California appellate courts regarding the appropriate test for "unfairness" in the context of business-to-business (non-consumer) disputes.
Some courts apply a balancing test, weighing the utility of the defendant's conduct against the gravity of the harm to the plaintiff. Under this approach, a business practice is "unfair" if the harm it causes outweighs its benefits. See Motors, Inc. v. Times Mirror Co. (1980) 102 Cal.App.3d 735, 740. Other courts have adopted a more restrictive standard, requiring that the challenged practice either "threaten[] an incipient violation of an antitrust law, or violate[] the policy or spirit of one of those laws." See Cel-Tech Communications, supra, 20 Cal.4th at 187 (establishing this standard for UCL claims brought by competitors). Under the Cel-Tech standard, which the California Supreme Court adopted in the competitor context, the plaintiff must tether its "unfairness" theory to a specific legislative or regulatory policy.
Aggressive but legitimate competition for suppliers does not ordinarily rise to the level of an "unfair" business practice under either test. Under the balancing test, the utility of robust competition in supplier markets — which benefits consumers by driving down costs and promoting innovation — outweighs the harm to a competitor that loses supplier relationships to a rival offering better terms. Under the Cel-Tech standard, Vantor would need to identify a specific antitrust law or policy that Cascade's conduct threatens to violate, and the complaint does not articulate any such theory.
Cascade's conduct — offering superior commercial terms to willing suppliers in arm's-length negotiations — is the essence of market competition. It would be a remarkable extension of the UCL to classify such conduct as an "unfair" business practice.
D. Preemption / Duplication Defense
A key defense argument with respect to the UCL claim is that it is duplicative of the tortious interference claims and does not allege any independently actionable conduct beyond what is already alleged in the first two causes of action. The UCL claim adds nothing to Vantor's case; it merely repackages the same factual allegations under a different legal label.
California courts have recognized that the UCL should not be used as a vehicle for creating a duplicative cause of action where the same conduct is already the subject of specific tort claims with well-defined elements and defenses. See Cortez v. Purolator Air Filtration Products Co. (2000) 23 Cal.4th 163, 173 (noting the UCL's supplemental nature). While the UCL is broadly drafted, it was not intended to transform every business tort into an unfair competition claim, particularly where doing so would allow a plaintiff to circumvent the specific elements and defenses applicable to the underlying tort.
We recommend raising the duplication defense as an affirmative defense in Cascade's answer and as a basis for a demurrer, motion for judgment on the pleadings, or motion for summary judgment. This is potentially the strongest basis for early disposition of the UCL claim and may be pursued before the resolution of the tortious interference claims.
VI. Available Defenses — Comprehensive Analysis
This section provides a comprehensive analysis of the defenses available to Cascade across all three causes of action. Several of these defenses, if established, are potentially dispositive of one or more claims.
A. Lack of Knowledge of Exclusivity Provisions
As discussed in Section III.C above, Cascade's position is that it did not have actual knowledge of the exclusivity provisions in the Vantor–supplier agreements at the time Cascade executed its own supply agreements with Hemsworth, Tridale, and Orion. This defense is directed at the second element of the tortious interference with contractual relations claim and, if established, is a complete defense to that claim.
The significance of this defense cannot be overstated. Without actual knowledge that the suppliers were subject to exclusivity obligations, Cascade cannot be said to have intentionally interfered with those obligations. At most, Cascade was aware — as any market participant would be — that the suppliers had existing business relationships with other customers, including Vantor. But general awareness of a customer-supplier relationship is categorically different from knowledge that the relationship is governed by an exclusive dealing arrangement.
The 14 internal Project Atlas emails that reference Vantor's supplier relationships must be carefully reviewed to determine what they actually demonstrate. If these emails merely reference Vantor as a customer of the suppliers — for example, noting that "Hemsworth's current customer base includes Vantor" or "we understand that Tridale has an existing relationship with Vantor" — they are insufficient to establish knowledge of the exclusivity terms. Such references are entirely consistent with ordinary competitive intelligence-gathering and do not demonstrate awareness of specific contractual restrictions. On the other hand, if any of the emails specifically reference exclusivity provisions, exclusive supply arrangements, or the notion that the suppliers are "locked in" or "restricted" from dealing with competitors, the knowledge defense becomes more challenging. The analysis of these emails is being undertaken separately by the litigation team, and the results will be critical to the assessment of this defense.
It bears emphasis that the burden of proving knowledge rests on Vantor, not on Cascade. Vantor must affirmatively demonstrate, through competent evidence, that Cascade had actual knowledge of the exclusivity provisions. If the evidence is ambiguous, equivocal, or insufficient to support a finding of actual knowledge, Cascade prevails on this element.
B. Independent Action by Suppliers / No Inducement
Cascade's second major defense is that the suppliers independently chose to enter into supply agreements with Cascade, and that Cascade did not induce or improperly encourage the suppliers to breach their obligations to Vantor. This defense goes to the third element of the tortious interference with contractual relations claim (intentional acts designed to induce breach or disruption) and, as discussed below, also supports the defense on the independently wrongful conduct element of the prospective advantage claim.
The factual basis for this defense is straightforward: Cascade offered the suppliers commercially superior terms — annual purchase commitments that were more than double what Vantor was providing — and the suppliers, exercising their own business judgment, chose to accept those terms. Offering a better deal is the most fundamental form of market competition. It is not tortious inducement. See Imperial Ice Co. v. Rossier, supra, 18 Cal.2d at 36–37.
The testimony of key supplier witnesses will be critical in establishing this defense. We anticipate that the following individuals will be important witnesses:
• Janet Kohler, Chief Executive Officer of Hemsworth Consumer Products LLC, who can testify regarding Hemsworth's independent business rationale for transitioning to Cascade.
• Gregory Fontaine, President of Tridale Manufacturing Inc., who can testify regarding Tridale's independent assessment of the relative commercial attractiveness of the Cascade and Vantor relationships.
• Simone Alvarez, Chief Executive Officer of Orion Lifestyle Brands Corp., who can testify regarding Orion's independent decision-making process in electing to enter the Cascade supply agreement.
To the extent these witnesses confirm that their companies' decisions were driven by the superior commercial terms offered by Cascade — rather than by any improper pressure, threats, or inducement from Cascade — this defense will be substantially strengthened. We recommend that third-party discovery be directed at obtaining documents and testimony from each supplier regarding the decision-making process, and that the deposition strategy prioritize these witnesses.
C. Proper Exercise of Termination-for-Convenience Clauses
As discussed in Section III.E above, if the three suppliers properly exercised their termination-for-convenience clauses — delivering written notice to Vantor within the contractually specified timeframes (90 days for Hemsworth, 60 days for Tridale, and 120 days for Orion) — before entering into their supply agreements with Cascade, then there was no "breach" of the Vantor–supplier agreements, and the first cause of action for tortious interference with contractual relations fails as a matter of law on Element 4.
This defense is potentially the most powerful in Cascade's arsenal because it goes to the heart of the contractual interference claim: without a breach, there is no tortious interference. The lawful exercise of a contractual termination right is not a breach. A party that does what its contract allows it to do has not breached the contract, regardless of the reason it chose to exercise its right.
The timeline of events is important:
• Hemsworth: The Cascade–Hemsworth agreement was executed on June 1, 2021. If Hemsworth delivered a 90-day termination notice to Vantor on or before that date, the termination would have been effective approximately August 30, 2021 — well before the March 14, 2022, expiration date.
• Tridale: The Cascade–Tridale agreement was executed on August 15, 2021. If Tridale delivered a 60-day termination notice to Vantor on or before that date, the termination would have been effective approximately October 14, 2021 — before the January 9, 2022, expiration date.
• Orion: The Cascade–Orion agreement was executed on May 10, 2021. If Orion delivered a 120-day termination notice to Vantor on or before that date, the termination would have been effective approximately September 7, 2021 — well before the June 30, 2022, expiration date.
Discovery must be directed at confirming whether and when each supplier delivered its termination notice to Vantor, and whether the notice complied with the contractual requirements (written form, proper addressee, etc.). If the termination notices were properly delivered, this defense is dispositive of the first cause of action.
D. Failure to Mitigate Damages
Under California law, a plaintiff has an affirmative duty to take reasonable steps to mitigate its damages. See Valle de Oro Bank v. Gamboa (1994) 26 Cal.App.4th 1686, 1691 ("The doctrine of avoidable consequences or mitigation of damages prevents recovery for damages which could have been avoided by reasonable effort and expenditure."). A plaintiff who fails to mitigate may not recover damages that could have been avoided through the exercise of reasonable diligence.
Cascade will argue that Vantor failed to mitigate its damages by failing to take reasonable steps to identify and secure replacement suppliers following the loss of its relationships with Hemsworth, Tridale, and Orion. The consumer goods supply market is competitive, and there are numerous potential suppliers in the home goods, consumer electronics accessories, and personal care product categories. Vantor's failure to pursue alternative supply arrangements — if established through discovery — would significantly reduce or potentially eliminate its recoverable damages.
Cascade's anticipated expert analysis is expected to demonstrate that a 40% to 55% reduction in any damages figure is warranted based on Vantor's failure to mitigate. This analysis will take into account the availability of alternative suppliers in each product category, the time required to establish new supply relationships, and the revenue that Vantor could reasonably have generated through replacement supplier arrangements.
We recommend that discovery be focused on this issue, including interrogatories and document requests directed at identifying what steps, if any, Vantor took to secure replacement suppliers following the termination of each of the three agreements. Deposition testimony from Vantor's procurement and supply chain personnel will also be important.
E. Terminability of Contracts Limits Damages
Even if liability is established on one or more of the tortious interference claims, the measure of Vantor's recoverable damages is constrained by the terminability of the exclusive supply agreements. Because each agreement contained a termination-for-convenience clause, Vantor's expectation of continued revenue from these relationships was limited to the remaining term of each agreement.
The remaining terms at the time of the relevant Cascade agreements were:
Vantor's claimed damages of $87.4 million are based on projected multi-year revenue streams that extend far beyond the existing contract terms. This methodology is fundamentally flawed as a matter of law. Where a contract is terminable at the convenience of either party upon notice, the plaintiff's expected future benefit is limited to the remaining term of the contract, reduced by the applicable notice period. Projecting revenue streams years into the future — based on the speculative assumption that the supplier relationships would have continued indefinitely — does not satisfy California's requirement of "reasonable certainty" in proving lost profits. See GHK Associates, supra, 224 Cal.App.3d at 873.
Based on the remaining contract terms and the annual purchase commitments under the Vantor–supplier agreements, we estimate that Vantor's provable damages range is approximately $6.1 million to $11.3 million — a fraction of the $87.4 million claimed. This range accounts for the remaining contract terms, the minimum annual purchase commitments, and reasonable assumptions about profit margins, but does not include speculative projections beyond the existing contract terms. The retention of a forensic economics expert will be important in developing this damages limitation argument.
F. Section 17200 Claim Is Duplicative / Preempted
As discussed in Section V.D above, the UCL claim is duplicative of the tortious interference claims and does not allege any independently actionable conduct beyond what is already the subject of the first two causes of action. We recommend that this defense be raised as an affirmative defense in the answer, and that it serve as the basis for an early motion for judgment on the pleadings or motion for summary judgment. The legal authority supporting this position is well-established, and the motion should be filed at the earliest appropriate stage.
G. Privilege / Justification Defense
California recognizes a limited privilege or justification defense to tortious interference claims. Under this defense, a defendant may assert that its conduct, even if it interfered with the plaintiff's contractual or prospective economic relationships, was justified by a legitimate business interest. See Richardson v. La Rancherita (1979) 98 Cal.App.3d 73, 80–81; Restatement (Second) of Torts § 767 (listing factors relevant to the justification analysis, including the nature of the defendant's conduct, the defendant's motive, and the interest sought to be advanced).
Cascade's Project Atlas initiative was a bona fide strategic initiative to diversify its supplier network across key product categories. Supplier diversification is a widely recognized and legitimate business objective that serves to reduce supply chain risk, improve product quality and range, and enhance competitive positioning. The decision to pursue relationships with Hemsworth, Tridale, and Orion was driven by Cascade's legitimate business need to expand its supply base — not by any desire to harm Vantor or to disrupt Vantor's business.
Competing for suppliers is a recognized legitimate business interest in a free-market economy. California law does not require a competitor to refrain from pursuing commercially attractive supplier relationships merely because those suppliers have existing relationships with a rival. The privilege or justification defense reinforces the broader theme of Cascade's defense: that Cascade engaged in ordinary, arm's-length commercial competition, and that the suppliers independently chose to enter into new relationships offering superior terms.
This defense is stronger with respect to the prospective economic advantage claim (where the independently wrongful conduct requirement already poses a significant obstacle for Vantor) than with respect to the contractual interference claim, but it is relevant to both. We recommend that the justification defense be asserted in the answer and developed through discovery.
VII. Procedural Considerations
A. Demurrer vs. Answer
We have considered whether to file a demurrer to any of the three causes of action in lieu of, or in addition to, filing an answer. A demurrer challenges the legal sufficiency of the complaint on its face and, if sustained, may result in dismissal of one or more causes of action (with or without leave to amend).
After careful consideration, we recommend proceeding directly with an answer and affirmative defenses — which are already in preparation for filing on October 18, 2021 — rather than filing a demurrer. The primary reason for this recommendation is that the factual questions at the heart of Cascade's defenses — particularly regarding Cascade's knowledge of the exclusivity provisions and the suppliers' exercise of their termination-for-convenience rights — are not amenable to resolution on a demurrer, which is limited to the four corners of the complaint. Vantor's complaint, while we believe it is ultimately insufficient, alleges facts that, if taken as true for purposes of a demurrer, might survive demurrer on the tortious interference claims.
The more effective strategy is to develop the factual record through targeted discovery and then pursue dispositive motions — motions for judgment on the pleadings or motions for summ

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