Intentional Interference With Contractual Relations
The Case: Trau-Med of America, Inc. v. Allstate Ins. Co., 71 S.W.3d 691 (Tenn. 2002). Author: Justice William M. Barker
Why it is a Blue Chipper: Trua-Med is the first Tennessee case to recognize a common law cause of action for intentional interference with contractual relations. To reach that result the Court overruled Nelson v. Martin, 958 S.W.2d 653 (Tenn. 1997).
The Basic Facts: “Medical center filed a complaint against an insurance company and several of its employees alleging, inter alia, that the defendants tortiously interfered with its business relationship and conspired to destroy the company’s business reputation.” 71 S.W.3d at 691.
The Bottom Line:
A. “[W]e expressly adopt the tort of intentional interference with business relationships, thereby overruling that portion of our decision in Nelson. We also hold that liability should be imposed on the interfering party provided that the plaintiff can demonstrate the following: (1) an existing business relationship with specific third parties or a prospective relationship with an identifiable class of third persons; (2) the defendant’s knowledge of that relationship and not a mere awareness of the plaintiff’s business dealings with others in general; (3) the defendant’s intent to cause the breach or termination of the business relationship; (4) the defendant’s improper motive or improper means, see, e.g., Top Serv. Body Shop, 582 P.2d at 1371; and finally, (5) damages resulting from the tortious interference.” Id. at 701.
B. “We adopt the discussion in § 766B comment c of the Restatement (Second) of Torts, which provides:
The relations protected against intentional interference by the rule stated in this Section include any prospective contractual relations, except those leading to contracts to marry, if the potential contract would be of pecuniary value to the plaintiff. Included are interferences with the prospect of obtaining employment or employees, the opportunity of selling or buying land or chattels or services, and any other relations leading to potentially profitable contracts. Interference with the exercise by a third party of an option to renew or extend a contract with the plaintiff is also included. Also included is interference with a continuing business or other customary relationship not amounting to a formal contract.” Id. at 701 fn. 4 (Emphasis added by the Court).
C. “It is clear that a determination of whether a defendant acted “improperly” or possessed an “improper” motive is dependent on the particular facts and circumstances of a given case, and as a result, a precise, all-encompassing definition of the term “improper” is neither possible nor helpful. However, with regard to improper motive, we require that the plaintiff demonstrate that the defendant’s predominant purpose was to injure the plaintiff. See Leigh Furniture & Carpet Co., 657 P.2d at 307-08.
Moreover, in the attempt to provide further guidance, we cite the following methods as some examples of improper interference: those means that are illegal or independently tortious, such as violations of statutes, regulations, or recognized common-law rules, see id. at 308; violence, threats or intimidation, bribery, unfounded litigation, fraud, misrepresentation or deceit, defamation, duress, undue influence, misuse of inside or confidential information, or breach of a fiduciary relationship, see Duggin, 360 S.E.2d at 836 (citing Top Serv. Body Shop, Inc., 582 P.2d at 1371 n. 11); and those methods that violate an established standard of a trade or profession, or otherwise involve unethical conduct, such as sharp dealing, overreaching, or unfair competition, see id. at 837.” Id. at 701 fn. 5.
D. “In the instant case, Trau-Med has pleaded both improper motive and improper means of interference. First, Trau-Med alleges that Allstate knew of its business relationships with plaintiff-attorneys and claimants. Specifically, Allstate allegedly interfered with six specific actions filed in the Circuit Court of Shelby County by making false statements about the propriety of Trau-Med’s business and by threatening to protract the litigation process. As a result of Allstate’s alleged conduct, “[p]laintiff-attorneys, claimants, and others, ••• because of fear of litigation and other reasons, [have been induced] not to refer persons and to discontinue use of Plaintiff’s clinic.” Trau-Med contends that this improper interference with its existing business relationships resulted in substantial economic harm to Trau-Med. Allstate’s predominant motive was to drive Trau-Med out of business for the sole purpose of limiting health care access to indigent claimants to “control and limit [Allstate’s] claims expenses.” Viewing these factual allegations in a light most favorable to the plaintiff, we find that Trau-Med has sufficiently stated a claim for tortious interference with a business relationship.” Id. at 701-02.
Note: There is also a statutory cause of action:
A. “It is unlawful for any person, by inducement, persuasion, misrepresentation, or other means, to induce or procure the breach or violation, refusal or failure to perform any lawful contract by any party thereto; and, in every case where a breach or violation of such contract is so procured, the person so procuring or inducing the same shall be liable in treble the amount of damages resulting from or incident to the breach of the contract. The party injured by such breach may bring suit for the breach and for such damages.” T. C. A. § 47-50-109.