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Freeman & Mills, Inc. v. Belcher Oil Company

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


Facts

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) (plaintiff) to provide accounting services on Belcher’s behalf. Subsequently, Belcher’s new general counsel became dissatisfied with Morgan’s work, fired the firm, and told the firm to have Freeman stop working on the suit. Freeman 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’s work and therefore that Freeman should look to Morgan to obtain its compensation. Freeman eventually brought suit against Belcher for bad-faith denial of the contract between Belcher and Morgan. A jury found that Belcher did deny the contract in bad faith, and the trial court entered judgment in favor of Freeman. The appellate court reversed. The Supreme Court of California granted review to analyze its confusing and often criticized holding in Seaman’s Direct Buying Service, Inc. v. Standard Oil Co., 686 P.2d 1158 (1984), which established the tort of bad-faith denial of a contract.

Rule of Law

Issue

Holding and Reasoning (Lucas, C.J.)

Concurrence/Dissent (Mosk, J.)

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