The Latest Intentional Interference with Business Relationships Decision

In Clear Water Partners, LLC v. Benson, No. E2016-00442-COA-R3-CV (Tenn. Ct. App. Jan. 26, 2017), the Court of Appeals reversed dismissal of a claim for intentional interference with business relationships and civil conspiracy.  The Tennessee court concluded that a current contractual relationship was not an automatic bar to an intentional interference with contractual relationships claim.

Plaintiff had an option contract to purchase and develop 111 acres of land, with the purchase being “contingent on the approval of a development plan, obtaining rezoning approval, and the performance of certain site development work.” Plaintiff also had a contract to sell Paul Murphy around 30 acres of the property once the option had been executed. According to plaintiff, the 23 named individual defendants used “improperly motivated conduct and/or improper means” to delay and oppose the rezoning and the approval of the development plan, causing Mr. Murphy to “void” his contract with plaintiff. Subsequently, plaintiff entered into another contract to sell the 30 acres to Belle Investments, but that contract required plaintiff to make some changes to its plan and incur damages.

As plaintiff continued to work towards rezoning and approval of its project, plaintiff alleged that the Defendants “individually and through their attorney/agent, ‘vigorously opposed’ its rezoning application and development plans.” Plaintiff alleged that defendants created false email accounts to make it look like residents near the development were emailing the County Commission, that one defendant sent a flyer containing false information home with the students at an elementary school, that one defendant gave a flyer with false information to nearby residents, and that an affidavit containing false information was given to the planning commission and zoning board, among other allegations. Plaintiff’s fight with defendants wound its way through the planning commission and zoning board, the circuit court, and even included an appeal to the Court of Appeals. At the time of plaintiff’s filing of the complaint in this case, the circuit court had upheld the zoning board’s decision to approve the development plan and deny part of the rezoning request.

Plaintiff filed suit against defendants for tortious interference with business relationships, tortious interference with contracts, and civil conspiracy. The trial court granted defendants’ motions to dismiss all of plaintiff’s claims. On appeal, the dismissal of the tortious interference with business relationships and civil conspiracy claims was reversed.

Civil Conspiracy

The Court of Appeals first looked at plaintiff’s civil conspiracy claim. Some of the defendants moved to dismiss this claim based on the argument that the complaint “included no specific factual allegations…about any of these individuals.” The Court pointed out, though, that “[i]f a conspiracy is proven, each conspirator is liable for his or her co-conspirators’ wrongful acts and for the damages resulting to the plaintiff.” (internal citation omitted).

Here, the Court noted the alleged wrongful acts committed by some of the individual defendants while opposing plaintiff’s development. The Court found that “[a] review of the complaint reveals that [plaintiff] alleged the Defendants acted with a common design to interfere with [plaintiff’s] contracts and business relationships.” The Court held that plaintiff “articulated overt acts by the Defendants to support its claim for civil conspiracy against the Defendants so long as we find [plaintiff’s] predicate act(s) were sufficient to withstand the Defendants’ motion to dismiss.” Further, the Court found that plaintiff had pled sufficiently regarding defendants’ being vicariously liable for the alleged wrongful acts committed by defendants’ attorney. Accordingly, the Court held that if either of the predicate torts could withstand the motion to dismiss, then the civil conspiracy claim could move forward as well.

Intentional Interference with Business Relationships

Next, the Court analyzed plaintiff’s intentional interference with business relationships claim. To succeed on such a claim, a plaintiff must prove:

(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; and finally, (5) damages resulting from the tortious interference.

(internal citation and quotation omitted). Here, plaintiff alleged that this “claim was based on the necessity of continuing to negotiate with the [seller of the property], Mr. Murphy, and Belle Investment.” Defendants argued, though, that because plaintiff was already in contractual relationships with these parties, a claim for intentional interference with business relationships was improper. The issue in this case, then, was “whether [plaintiff’s] current contractual relationships bar it from asserting this tort with respect to its future contractual or other business relationships with the same third parties.”

After looking at both Tennessee common law and the Restatement (Second) of Torts, the Court ultimately concluded that plaintiff’s current contractual relationships did not bar this claim. The Court held:

We believe the fact that [plaintiff] had contractual relationships with the same third parties with which it alleged it had business relationships and which formed the basis of its tortious interference claim is inconsequential so long as the tortious interference claim is based on future contractual and/or business relationships, not current or prior contractual relationships. Implicit in comment c of the Restatement (Second) of Torts § 766B is that a plaintiff asserting this tort may have an existing contract with a third party when the defendant engages in improper conduct that interferes with the plaintiff’s future contractual relationship with that third party.

Accordingly, this claim was reinstated, as was the civil conspiracy claim since there was now a predicate tort moving forward.

Tortious Interference with Contracts

The trial court dismissed plaintiff’s tortious interference with contracts claim based on Rule 10.03 of the Tennessee Rules of Civil Procedure. Rule 10.03 essentially states that when a claim is based on a written instrument such as a contract, that contract should be attached to the complaint, except in certain listed circumstances. Here, defendants argued that plaintiff’s claims were based on its contracts with the seller of the land and the two potential purchasers of the 30-acre tract, but that it failed to attach these contracts to the complaint.

The Court of Appeals agreed that Rule 10.03 applied to this case, and agreed with the trial court that dismissal could be a proper sanction for failure to comply with Rule 10. Plaintiff asserted, though, that it “included averments in its complaint to meet the bare minimum requirements” of Rule 10.03. While addressing this argument put forth by plaintiff, the Court of Appeals actually determined that plaintiff had failed to state a cause of action for tortious interference with its contracts because it did not address the elements of the claim within the allegations of the complaint. In the complaint, plaintiff did “not allege the Defendants were aware of its contract with Mr. Murphy. Further, [plaintiff] fails to specify how the Defendants’ acts were the proximate cause of the breach, as it must to state a claim for tortious interference with its contracts.” The dismissal of the interference with contracts claim was thus affirmed, although on different grounds than the trial court’s dismissal.

Attorneys’ Fees & Timeliness of Appeal

Finally, the Court addressed the trial court’s award of attorneys’ fees to defendants and the timeliness of plaintiff’s appeal.

Regarding fees, the trial court had awarded defendants’ attorneys’ fees under Tenn. Code Ann. § 4-21-1003(c), which provides civil immunity and judicial privilege to individuals in certain circumstances. The Court of Appeals overturned this grant of fees, noting that “none of the Defendants in this case has prevailed on any claim of immunity, which is required before an award of fees and costs can be granted under this statute.” Further, the Court pointed out that plaintiff alleged Defendants knew statements were false when they were made, which would have taken them out of the purview of this statute, and that judicial privilege is only available when a plaintiff is suing for defamation, which was not the claim in this matter.

The final issue here was whether plaintiff’s appeal was timely. Plaintiff had filed a motion to alter or amend with the trial court under Rule 59, and based its appeal schedule on the court’s denial of that motion. Defendants argued, though, that this motion was really one for reconsideration, which is not permitted in Tennessee, and that the appeal was therefore not timely. The Court of Appeals ruled that plaintiff’s motion was permitted and its appeal was timely, as plaintiff

did not raise any issue for the first time its motion to alter or amend, nor did it ‘simply ask the trial court to change its mind and accept the Plaintiff’s argument…’ Rather, [plaintiff] properly moved the trial court to address what it considered to be a clear error of law and/or injustice, thereby providing the trial court with an opportunity to correct any errors before its judgment became final and avoiding an unnecessary appeal.

Having considered all the issues at play here, the Court reversed the award of attorneys’ fees and reversed the dismissal of the intentional interference with business relationships and civil conspiracy claims.

This case contains a few nuggets worthy of mention. First, we do not see too many cases on intentional interference with business relationships, so it is always interesting when one comes along. Here, the Court of Appeals decided a key holding regarding these claims—that an existing contractual relationship with a third party does not necessarily bar a claim for interference with business relationships with that same third party. A second important takeaway here is that Rule 10.03 was found to apply to a claim for tortious interference with contracts. If you are filing such a claim, then, you need to consider your obligations under 10.03 and which documents should be attached to your complaint.