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Freeman & Mills, Inc. v. Belcher Oil Company

Supreme Court of California
900 P.2d 669 (Cal. 1995)


Belcher Oil Company (Belcher) (defendant) hired the law firm Morgan, Lewis & Bockius (Morgan) to defend it in a lawsuit. Belcher and Morgan entered into a contract providing that Belcher would pay for costs incurred by Morgan on its behalf in the suit, including accountants’ fees. In turn, Morgan hired Freeman & Mills, Inc. (Freeman and Mills) (plaintiff) to provide accounting services on Belcher’s behalf. Subsequently, Belcher’s new general counsel became dissatisfied with Morgan’s work and fired the firm and told it to have Freeman and Mills stop working on the suit. Freeman and Mills stopped working and sent a bill to both Morgan and Belcher that went unpaid. Belcher claimed that it had not been consulted by Morgan on the extent of Freeman and Mills’s work and therefore Freeman and Mills should look to Morgan to obtain its compensation. Ultimately, Freeman and Mills brought suit against Belcher for bad faith denial of the contract between Belcher and Morgan. The trial court found that Belcher did deny the contract in bad faith and ruled in favor of Freeman and Mills. The court of appeal reversed. The Supreme Court of California granted review to analyze its confusing and often criticized holding in Seaman’s Direct Buying Service Center, Inc. v. Standard Oil Co. (1984), which established the tort of bad faith denial of a contract.

Rule of Law


Holding and Reasoning (Lucas, C.J.)

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