Intentional Interference With Business Relations Requires Proof of Damages

In Springfield Investments, LLC v. Global Investments, LLC, No. E2014-01703-COA-R3-CV (Tenn. Ct. App. Aug. 27, 2015), plaintiffs sued defendants for intentional interference with business relationships related to plaintiffs’ opening of a Wendy’s restaurant in Cleveland, Tennessee. Defendants already owned and operated a Wendy’s in Cleveland, and in 1998 one of plaintiff’s brothers signed a non-compete agreement with defendants agreeing not to open a Wendy’s in Cleveland. A later “Clarification and Confirmation” document signed by the brother included that no entities he was associated with would open a Wendy’s, including Springfield Investments, LLC (a plaintiff in this case). The individual plaintiff in this case was never a party to the non-compete, and by the time that the pertinent events took place the brother signing the non-compete was not the owner of Springfield Investments.

In January 2010, plaintiffs began the process of seeking approval from Wendy’s to build and open a restaurant in Cleveland. Because it would be 4.8 miles from defendants’ existing Wendy’s, the restaurant chain’s procedures required defendants to be notified and have the opportunity to oppose the new franchise. Over the course of the next several months, defendants followed the standard procedures allowed by Wendy’s to oppose the new restaurant. At one point Wendy’s, using its own discretion, allowed for additional time for defendants to submit certain requests, but otherwise the normal course of action provided for in Wendy’s franchise guidelines was followed.

Defendants first objected to the restaurant on February 9, 2010. On May 10, 2010, after several more written correspondences, one of defendants actually met with Wendy’s officials, and at this meeting defendant presented the non-compete signed in 1998 to Wendy’s. Plaintiffs subsequently filed suit and obtained a temporary restraining order (“TRO”) stating that the non-compete was not valid against plaintiffs and could not be used to try to block plaintiffs from developing the restaurant at issue. On June 8, 2010, the trial court entered the TRO and, after that point, defendants did not try to use it in opposing the new restaurant. All opposition following that point was done through the avenues allowed by Wendy’s franchise agreements.

After a bench trial, the trial court found that plaintiffs failed to prove the tort of intentional interference with business relations (“IIBR”), but did award plaintiffs nominal damages of $500. The Court of Appeals affirmed

Because IIBR requires a plaintiff to prove damages, the Court analyzed the issue of whether plaintiff had proven any damages first, finding that this issue was dispositive of the case. Plaintiffs claimed over $400,000 in compensatory damages allegedly resulting from defendants wrongfully injecting the non-compete into the franchise negotiations, thus delaying the process of opening the restaurant approximately 10 months. The trial court, though, specifically found that plaintiffs failed to prove that the use of the non-compete for approximately four weeks of the opposition process “extended the time period allowed for objections under Wendy’s Guidelines,” and the Court of Appeals agreed. The Court reasoned:

The flaw in Plaintiffs’ argument is that although they demonstrated that these expenses were incurred between August 2010 and June 2011, they failed to demonstrate that the expenses were caused by any interference by Defendants beyond that allowed by the process delineated in Wendy’s Guidelines. As the trial court explained, the admissible evidence demonstrated that the [non-compete] was an issue considered by Wendy’s for only one month, from the time of the meeting between [defendant] and Wendy’s officials on May 10, 2010, through entry of the temporary restraining order on June 8, 2010.

The Court explained that “Wendy’s essentially followed the procedures set forth in its Guidelines with the exception of what was ultimately a two-week time extension allowed to Defendants to request an impact study.” The Guidelines allowed Wendy’s the discretion to grant this extension. Defendants were ultimately denied on their second-level appeal in August 2010, and defendants then had nothing to do with the development and opening process for plaintiffs’ restaurant between August 2010 and June 2011. Accordingly, the Court affirmed the finding that any delay “was due to the processes outlined and allowed by Wendy’s,” and that plaintiffs’ alleged damages therefore could not be attributed to defendants’ interference. Without damages, plaintiffs could not make their case for IIBR.

While the Court’s reasoning makes sense in this case, this shows just how difficult proving an IIBR case can be. Although it is true that the non-compete was only on Wendy’s radar for a month, it is impossible to quantify what impact that may have had on negotiations and approval processing. Defendants used a non-compete that they knew was unenforceable against plaintiffs and injected it into a multi-level appeal process. They created confusion in the situation, which was possibly their goal. Unfortunately because damages were impossible to pin to defendants’ actions, plaintiffs here were left with no one to hold accountable for their delayed opening.