Chapter 2 Economic Relations (PDF)

02 kutner 4e final 3/1/13 12:39 PM Page 123 Copyright © 2013 Carolina Academic Press, LLC. All rights reserved. Chapter 2 Economic Relations Section 1. Interference with Contractual Relations A. Inducing Breach of Contract ————— Lumley v. Gye Court of Queen’s Bench (1853) 2 El. & Bl. 216, 118 Eng. R...

02 kutner 4e final 3/1/13 12:39 PM Page 123 Copyright © 2013 Carolina Academic Press, LLC. All rights reserved. Chapter 2 Economic Relations Section 1. Interference with Contractual Relations A. Inducing Breach of Contract ————— Lumley v. Gye Court of Queen’s Bench (1853) 2 El. & Bl. 216, 118 Eng. Rep. 749, 17 Jur. 827, 22 L.J.Q.B. 463, 1 W.R. 432 [The renowned Johanna Wagner signed a contract with Lumley, proprietor of Her Majesty’s Theatre, to perform in operas at the theatre for a period of three months, during which she was not to sing elsewhere without Lumley’s written authorization. Wagner subsequently agreed with Gye, proprietor of the Royal Italian Opera, Covent Garden, to sing there and abandon her agreement with Lumley, who was to pay her less than Gye. Lumley obtained an injunction against Wagner and Gye which restrained them from presenting performances in breach of the negative provision of the Lumley-Wagner contract. Thus Wagner could not sing for Gye; but she did not perform for Lumley. Lumley brought an action for damages against Gye. The first count alleged that Gye, knowing of Lumley’s contract with Wagner and wrongfully and maliciously intending to injure him, enticed and procured Wagner to refuse to perform for Lumley and to completely abandon her contract and service thereunder. The second count alleged in similar terms that Gye enticed and procured Wagner to continue to refuse to perform after the injunction until the three month contract period expired. The third count alleged that Wagner was hired to be and had become a “dramatic artiste” at Lumley’s theatre and that Gye, knowing this, wrongfully and maliciously enticed and procured Wagner to depart and remain absent from the service and employment of Lumley until the expiration of her engagement. Gye demurred.] CROMPTON J....... It was said, in support of the demurrer, that it did not appear in the declaration that the relation of master and servant ever subsisted between the plaintiff and Miss Wagner; that Miss Wagner was not averred, especially in the two first counts, to have entered upon the service of the plaintiff; and that the engagement of a theatrical performer, even if the performer has entered upon the duties, is not of such a nature as to make the performer a servant, within the rule of law which gives an action to the master for the wrongful enticing away of his servant. And it was laid down broadly, as a general proposition of law, 123 02 kutner 4e final 3/1/13 12:39 PM Page 124 Copyright © 2013 Carolina Academic Press, LLC. All rights reserved. 124 Johanna Wagner 2 · ECONOMIC RELATIONS Nationalarchiv der Richard-Wagner-Stiftung that no action will lie for procuring a person to break a contract, although such procuring is with a malicious intention and causes great and immediate injury. And the law as to enticing servants was said to be contrary to the general rule and principle of law, and to be anomalous, and probably to have had its origin from the state of society when serfdom existed, and to be founded upon, or upon the equity of, the Statute of Labourers. It was said that it would be dangerous to hold that an action was maintainable for persuading a third party to break a contract, unless some boundary or limits could be pointed out; and that the remedy for enticing away servants was confined to cases where the relation of master and servant, in a strict sense, subsisted between the parties; and that, in all other cases of contract, the only remedy was against the party breaking the contract. Whatever may have been the origin or foundation of the law as to enticing of servants, and whether it be, as contended by the plaintiff, an instance and branch of a wider rule, or whether it be, as contended by the defendant, an anomaly and an exception from the general rule of law on such subjects, it must now be considered clear law that a person who wrongfully and maliciously or, which is the same thing, with notice, interrupts the relation subsisting between master and servant by procuring the servant to depart from the master’s service, or by harbouring and keeping him as servant after he has quitted it and during the time stipulated for as the period of service, whereby the master is injured, commits a wrongful act for which he is responsible at law. I think that the rule applies wherever the wrongful interruption operates to prevent the service during the time for which the parties have contracted that the service shall continue: and I think that the relation of master and servant subsists, sufficiently for the purpose of such action, during the time for which there is in existence a binding contract of hiring and service between the parties; and I think that it is a fanciful and technical and unjust distinction to say that the not having actually entered into the service, or that the service not actually continu- 02 kutner 4e final 3/1/13 12:39 PM Page 125 Copyright © 2013 Carolina Academic Press, LLC. All rights reserved. 2 · ECONOMIC RELATIONS 125 ing, can make any difference.... The wrong and injury are surely the same, whether the wrong doer entices away the gardener, who has hired himself for a year, the night before he is to go to his work, or after he has planted the first cabbage on the first morning of his service; and I should be sorry to support a distinction so unjust, and so repugnant to common sense, unless bound to do so by some rule or authority of law plainly shewing that such distinction exists. The proposition of the defendant, that there must be a service actually subsisting, seems to be inconsistent with the authorities that shew these actions to be maintainable for receiving or harbouring servants after they have left the actual service of the master. In Blake v. Lanyon (6 T.R. 221) it was held... that an action will lie for continuing to employ the servant of another after notice, without having enticed him away, and although the defendant had received the servant innocently. It is there said that “a person who contracts with another to do certain work for him is the servant of that other till the work is finished, and no other person can employ such servant to the prejudice of the first master; the very act of giving him employment is affording him the means of keeping him out of his former service.” This appears to me to shew that we are to look to the time during which the contract of service exists, and not to the question whether an actual service subsists at the time.... The objection as to the actual employment not having commenced would not apply in the present case to the third count, which states that Miss Wagner had become the artiste of the plaintiff, and that the defendant had induced her to depart from the employment. But it was further said that the engagement, employment or service, in the present case, was not of such a nature as to constitute the relation of master and servant, so as to warrant the application of the usual rule of law giving a remedy in case of enticing away servants. The nature of the injury and of the damage being the same, and the supposed right of action being in strict analogy to the ordinary case of master and servant, I see no reason for confining the case to services or engagements under contracts for services of any particular description; and I think that the remedy, in the absence of any legal reason to the contrary, may well apply to all cases where there is an unlawful and malicious enticing away of any person employed to give his personal labour or service for a given time under the direction of a master or employer who is injured by the wrongful act; more especially when the party is bound to give such personal services exclusively to the master or employer; though I by no means say that the service need be exclusive.... I think that, where a party has contracted to give his personal services for a certain time to another, the parties are in the relation of employer and employed, or master and servant, within the meaning of this rule. And I see no reason for narrowing such a rule; but I should rather, if necessary, apply such a remedy to a case “new in its instance, but” “not new in the reason and principle of it”, that is, to a case where the wrong and damage are strictly analogous to the wrong and damage in a well recognised class of cases. In deciding this case on the narrower ground, I wish by no means to be considered as deciding that the larger ground... is not tenable, or as saying that in no case except that of master and servant is an action maintainable for maliciously inducing another to break a contract to the injury of the person with whom such contract has been made. It does not appear to me to be a sound answer, to say that the act in such cases is the act of the party who breaks the contract; for that reason would apply in the acknowledged case of master and servant. Nor is it an answer, to say that there is a remedy against the contractor, and that the party relies on the contract; for, besides that reason also applying to the case of master and servant, the action on the contract and the action against the malicious wrongdoer may be for a different matter; and the damages occasioned by such malicious injury 02 kutner 4e final 3/1/13 12:39 PM Page 126 Copyright © 2013 Carolina Academic Press, LLC. All rights reserved. 126 2 · ECONOMIC RELATIONS might be calculated on a very different principle from the amount of the debt which might be the only sum recoverable on the contract.... I think, therefore, that our judgment should be for the plaintiff. ERLE J.... [A]n action will lie by a master against a person who procures that a servant should unlawfully leave his service.... [This] rests upon the principle that the procurement of the violation of the right is a cause of action, and... when this principle is applied to a violation of a right arising upon a contract of hiring, the nature of the service contracted for is immaterial.... He who maliciously procures a damage to another by violation of his right ought to be made to indemnify; and that, whether he procures an actionable wrong or a breach of contract.... [Wightman, J., delivered a concurring opinion. Coleridge, J., delivered a dissenting opinion.] Notes 1. The common law actions for enticement and harboring of a servant trace their ancestry, in major part, to the Statutes of Labourers, enacted in response to the great loss of life in the Plague of the mid-fourteenth century. Finding that labor was in very short supply, that high wages were being demanded and obtained, and that servants were leaving their masters when better terms could be obtained elsewhere, Parliament enacted measures that required persons who did not have land to till or some other form of livelihood to go into service; prohibited departure from service before the term agreed; prohibited receiving or retaining in service a person who had so departed; and limited wages to customary (pre-Plague) amounts. See the dissent of Coleridge, J., in Lumley v. Gye; Jones, Per Quod Servitium Amisit, 74 L.Q. Rev. 39 (1958). 2. The idea of an action for procuring breach of contract can be found in cases as early as the sixteenth century. See Baker, Reports of Sir John Spelman, Volume II, 94 Selden Soc’y 253–255 (1978). But the contemporary action stems from Lumley v. Gye. See Waddams, Johanna Wagner and the Rival Opera Houses, 117 L.Q. Rev. 431 (2001), for a valuable examination of the case. Was the court right to establish such an action? Isn’t the essential reason the contract was not performed that the person who assumed the contractual obligation chose not to perform? Why add a tort action against a third person to the contract action against the breaching party? In Bowen v. Hall, (1881) 6 Q.B.D. 333 (C.A.), Lumley v. Gye was approved on the basis that to persuade a person to break his contract was a wrongful act, when done for the “indirect purpose” of injuring the plaintiff or benefitting the defendant at plaintiff ’s expense, and the breach and ensuing injury were natural and probable consequences of the persuasion. Should a third-party beneficiary of the contract be allowed to sue? See Tamposi Associates, Inc. v. Star Market Co., Inc., 119 N.H. 630, 406 A.2d 132 (1974); Willard v. Claborn, 220 Tenn. 501, 419 S.W.2d 168 (1967). 3. Generally it is not a tort to entice a person from the employment of another if no contract is broken. See Triangle Film Corp. v. Artcraft Pictures Corp., 250 F. 981 (2d Cir. 1918); Boston Glass Manufactory v. Binney, 4 Pick. (21 Mass.) 425 (1827) (workmen quit after giving plaintiffs notice that was term of their employment). Liability is possible, but not probable, when the person is an employee at will. See pp. 143–155, infra. Even if there is a breach of an employment contract, should there be liability when the person enticed was not a star soprano or uniquely talented employee, but a person who could be replaced without much difficulty? 02 kutner 4e final 3/1/13 12:39 PM Page 127 Copyright © 2013 Carolina Academic Press, LLC. All rights reserved. 2 · ECONOMIC RELATIONS 127 4. Not all authority applies to the tort action a measure of damages different from the measure to be applied in an action for breach of the contract, but the prevailing view affords a more expansive recovery. See Dobbs, Law of Torts 1296–1298 (2000). It is debatable whether liability is to extend to all harm “caused in fact” by the tort or be limited to harm that is “proximately” caused or foreseeable. See Rite Aid Corp. v. Lake Shore Investors, 298 Md. 611, 471 A.2d 735 (1984); Restatement (Second) of Torts § 774A (1979). Should the damages include profits or revenues realized by the tortfeasor? See National Merchandising Corp. v. Leyden, 370 Mass. 425, 348 N.E.2d 771 (1976) (unjust enrichment measure appropriate for wilful interference); Annot., Recovery Based On Tortfeasor’s Profits in Action for Procuring Breach of Contract, 5 A.L.R.4th 1276 (1981) (majority of cases allow damages based at least in part on profit or revenue realized). 5. Does Lumley v. Gye support the issuance of an injunction against inducement of breach of contract? Should an injunction be granted when plaintiff’s object is to retain employment of someone who wants to quit plaintiff? See New England Patriots Football Club, Inc. v. University of Colorado, 592 F.2d 1196 (1st Cir. 1979) (coach induced to leave professional football team and return to college football). Or to prevent the contracting party from replacing plaintiff with someone the contracting party has more confidence in? See Warren v. Mendy, 1 W.L.R. 853 (C.A.) (boxer broke contract with manager/promoter). ————— Glamorgan Coal Company, Ltd. v. South Wales Miners’ Federation Court of Appeal 2 K.B. 545, aff’d, A.C. 239 (H.L.) [Wages paid to coal miners in south Wales varied according to the market price of coal. Concerned that coal dealers were driving down prices, the miners’ union declared several “stop-days,” i.e., days on which miners would not work, “with a view to regulating the supply according to the demand.” The mine owners objected. They claimed damages and an injunction in an action against the union and its officers for “wrongfully and maliciously procuring and inducing” the miners to break their employment contracts. The contracts required a month’s notice of termination, which had not been given.] ROMER L.J.... In Quinn v. Leathem [ A.C. 495] Lord Macnaghten said [of Lumley v. Gye, “the decision was right, not on the ground of malicious intention — that was not, I think, the gist of the action — but on the ground that a] violation of legal right committed knowingly is a cause of action, and it is a violation of legal right to interfere with contractual relations recognised by law if there be no sufficient justification for the interference.” And in Mogul Steamship Co. v. McGregor, Gow & Co. [p. 167, infra] Bowen L.J. included in what is forbidden “the intentional procurement of a violation of individual rights, contractual or other, assuming always that there is no just cause for it.” But although, in my judgment, there is no doubt as to the law, yet I fully recognise that considerable difficulties may arise in applying it to the circumstances of any particular case. When a person has knowingly procured another to break his contract, it may be difficult under the circumstances to say whether or not there was “sufficient justification or just cause” for his act. I think it would be extremely difficult, even if it were possible, to give a complete and satisfactory definition of what is “sufficient justification,” and most attempts to do so would probably be mischievous.... I respectfully agree with what Bowen L.J. said in the Mogul Case, when considering the difficulty that might arise whether there 02 kutner 4e final 3/1/13 12:39 PM Page 128 Copyright © 2013 Carolina Academic Press, LLC. All rights reserved. 128 2 · ECONOMIC RELATIONS was sufficient justification or not: “The good sense of the tribunal which had to decide would have to analyze the circumstances and to discover on which side of the line each case fell.” I will only add that, in analyzing or considering the circumstances, I think that regard might be had to the nature of the contract broken; the position of the parties to the contract; the grounds for the breach; the means employed to procure the breach; the relation of the person procuring the breach to the person who breaks the contract; and I think also to the object of the person in procuring the breach. But, though I deprecate the attempt to define justification, I think it right to express my opinion on certain points in connection with breaches of contract procured where the contract is one of master and servant. In my opinion, a defendant sued for knowingly procuring such a breach is not justified of necessity merely by his shewing that he had no personal animus against the employer, or that it was to the advantage or interest of both the defendant and the workman that the contract should be broken.... [W]hat A. has to justify is his action, not as between him and the workman, but as regards the employer B.... [I]t is to my mind clear that the defendants, the federation, procured the men to break their contracts with the plaintiffs — so that I need not consider how the question would have stood if what the federation had done had been merely to advise the men, or if the men, after taking advice, had arranged between themselves to break their contracts, and the federation had merely notified the men’s intentions to the plaintiffs.... And it is not disputed that the federation acted as they did knowingly. So that the only question which remains is one of justification. Now the justification urged is that it was thought, and I will assume for this purpose rightly thought, to be in the interest of the men that they should leave their work in order to keep up the price of coal on which the amount of wages of the men depended. As to this, I can only say that to my mind the ground alleged affords no justification for the conduct of the federation towards the employers; for, as I have already pointed out, the absence on the part of the federation of any malicious intention to injure the employers in itself affords no sufficient justification. But it was said that the federation had a duty towards the men which justified them in doing what they did. For myself I cannot see that they had any duty which in any way compelled them to act, or justified them in acting, as they did towards the plaintiffs. And the fact that the men and the federation, as being interested in or acting for the benefit of the men, were both interested in keeping up prices, and so in breaking the contracts, affords in itself no sufficient justification for the action of the federation as against the plaintiffs, as I have already pointed out. I think, therefore, that the appeal must succeed. [Stirling, L.J., delivered a concurring opinion. Vaughan Williams, L.J., delivered a dissenting opinion.] ————— Camden Nominees, Ltd. v. Forcey Chancery Division Ch. 352 [Plaintiffs were landlords of a block of flats. In standard leases they undertook to provide heating, hot water, cleaning of passages and other services. The landlords failed to satisfy tenants’ complaints about defaults in providing these services. Tenants organized an association and informed the landlords that rent payments would be withheld temporarily until the landlords fulfilled their obligations under the leases. The landlords brought an action for damages and to restrain leaders of the tenants’ association from inducing tenants to breach the lease agreements by withholding rent.] 02 kutner 4e final 3/1/13 12:39 PM Page 129 Copyright © 2013 Carolina Academic Press, LLC. All rights reserved. 2 · ECONOMIC RELATIONS 129 SIMONDS J.... By the end of the nineteenth century it had been clearly established... that it is an actionable wrong without justification to interfere with the contractual rights of another.... [N]o corresponding definition was given of what amounts to justification for such interference.... Read v. Friendly Society of Operative Stonemasons [ 2 K.B. 732]... is useful as showing (a) that what is otherwise wrong is not made better by an honest belief that it is very much to the advantage of the person committing the wrong, and (b) that, where illegal means are used, “just cause” cannot come into the discussion at all.... In Smithies v. National Association of Operative Plasterers [ 1 K.B. 310] it was once again sought, but sought in vain, to justify the procurement of breaches of contract of service by workmen. It was there held that a bona fide belief on the part of the union that the employers were intending to evade a settlement of the dispute in accordance with the agreement or even an actual intention on the part of the employers so to do, did not constitute justification for inducing the workmen to break their contract. Again it was recognized that there might be justification, and Buckley L.J. gave the familiar example of inconsistent contracts, but no other example. He added, however, this observation, which bears on the present case: “The contention of the defendants here is: ‘We were entitled to induce Forrester to break his contract with you because you had broken your contract, as contained in the National Agreement, with us.’ This is setting up that, where there are two independent contracts, the breach of the one by the one party entitles a breach of the other by the other party. This contention, in my opinion, cannot be maintained.” In Pratt v. British Medical Association [ 1 K.B. 244] McCardie J. summed up the authorities by saying that malice in the sense of spite or ill-will was not an ingredient of the action; and, secondly, that no justification existed by reason of the fact that the defendants acted either for the advancement of their own trade interests or of the interests of those with whom they were associated. Thus the law stood when, in 1924, Russell J. decided in Brimelow v. Casson [ 1 Ch. 302] that the defendants, though they had procured the breach by certain theatre proprietors of their contracts with the plaintiff, had a sufficient justification for their action. The learned judge... said: “These defendants, as it seems to me, owed a duty to their calling and to its members, and, I am tempted to add, to the public, to take all necessary peaceful steps to terminate the payment of this insufficient wage, which in the plaintiff’s company had apparently been in fact productive of those results which their past experience had led them to anticipate.”... In De Jetley Marks v. Greenwood [ 1 All E.R. 863] Porter J. said, with regard to that plea: “The justification must, I think, involve an action taken as a duty, not the mere protection of the defendants’ own interests.”...... [T]he defendants have pleaded that they are justified in their otherwise actionable wrong on two grounds; the first, that they and those whom they would persuade to break their contracts have a common interest in making the landlords perform their obligations; and the second, that there is such a state of affairs here existing, on the one side tenants who are weak and on the other landlords who are strong and take advantage of their strength, that it is justifiable for the defendants to use a weapon which would otherwise be wrongful. In my judgment, there is no validity in either of these contentions. The defendants owed no duty to their fellow tenants; they sought their co-operation for their own ends, though no doubt a successful campaign would have been for the benefit of all alike. The end which they sought, namely, the performance by the landlords of their obligations, was one which could be reached by process of law. If the landlords broke their contract the 02 kutner 4e final 3/1/13 12:39 PM Page 130 Copyright © 2013 Carolina Academic Press, LLC. All rights reserved. 130 2 · ECONOMIC RELATIONS law gave the defendants their remedy by way of damages, or in a proper case by way of specific performance. There is neither reason nor authority for the suggestion that in such circumstances a common interest can justify the interference with contractual rights. If A, B, C, and D meet together and agree that in order to persuade or coerce X to a certain course they will each break their contracts with him, that would, I apprehend, be an actionable conspiracy. It would be a strange thing if A, calling together B, C, and D, and urging them to break their contracts could justify that act on the ground of common interest. This contention must, in my judgment, fail. The second contention was one which appeared to be directed less to my reason than to my emotions. The case was put as something analogous to Brimelow v. Casson, in which any step that put an end to an intolerable position might be regarded as justifiable. Brimelow v. Casson stands alone, and has been the subject of a good deal of controversy. In a comparable case it would be my duty to follow it, though I would humbly suggest that on the facts stated in the judgment that case might have been simply disposed of by the application of the maxim Ex turpi causa non oritur actio. But, however that may be, there is no real analogy between the two cases. It is a dangerous proposition that inequality in wealth or position justifies a course otherwise actionable, and that tenants may against their landlord adopt measures of self-help because in their judgment the law does not afford them adequate remedy for his default.... [N]either [Brimelow v. Casson] nor any other case supports the view that those who assume the duty of advising the withholding of rent or any other breach of contract can justify their action by protesting that they are performing a public service. Advice which is intended to have persuasive effects is not distinguishable from inducement, and there is no reason to suppose that the giving of such advice is justifiable except by those persons in whom the law recognizes a moral duty to give it. In the result I hold that the defendants without justification interfered with the plaintiff ’s contractual rights and it is clear that at the date of the issue of the writ they intended to continue to do so. I must therefore grant an injunction as asked.... Notes 1. As the South Wales Miners’ case reflects, it has come to be accepted that the fundamental intent requirement for the tort is intentional procurement of breach of contract, not purpose to cause harm or another form of malice. The action has been utilized most frequently by parties to personal services contracts, but its extension to interference with almost any other type of contract is well-established. See Temperton v. Russell, 1 Q.B. 715 (C.A.) (supply of building materials by plaintiff); Annot., Liability for Procuring Breach of Contract, 26 A.L.R.2d 1227 (1952). Many interference with contract actions arise from real estate sales and brokerage contracts. See Annots., Right of Real Estate Broker Against Third Person Who Prevented Broker from Earning Commission, or Who Received, or Induced Owner to Pay to Him or Another, Commission Which the Broker Had Earned, 97 A.L.R. 1273 (1935); 146 A.L.R. 1417 (1943); Annot., Liability of Purchaser of Real Estate for Interference with Contract Between Vendor and Another Purchaser, 27 A.L.R.3d 1227 (1969); Annot., Liability of Purchaser of Real Estate for Interference with Contract Between Vendor and Real-Estate Broker, 29 A.L.R.3d 1229 (1970); Annot., Liability of Real-Estate Broker for Interference with Contract Between Vendor and Another Real-Estate Broker, 34 A.L.R.3d 720 (1970). Should this be affected by the availability of an order for specific performance? A number of states have statutes creating a cause of action for or prohibiting interference with certain types of contracts. One example of pro- 02 kutner 4e final 3/1/13 12:39 PM Page 131 Copyright © 2013 Carolina Academic Press, LLC. All rights reserved. 2 · ECONOMIC RELATIONS 131 hibited interference is inducing a tenant to leave the premises prior to the expiration of the lease. See Annot., Liability for Interference with Lease, 96 A.L.R.3d 862 (1980). 2. A plaintiff is not to succeed without proof that defendant knew of the contract when defendant procured action that breached it. See Tenta v. Guraly, 140 Ind. App. 160, 221 N.E.2d 577 (1966); Stannard v. McCool, 198 Md. 609, 84 A.2d 862 (1951) (successive contracts to convey same land). In principle, a person cannot intentionally procure breach of contract without sufficient knowledge and understanding of the contract’s provisions to know that the contract will be broken or that his object involves breach of contract. But some decisions sustain actions on the basis that defendant knew of the contract and therefore had reason to know of the breach of contract. See Bolger v. Danley Lumber Co., Inc., 77 Ill. App. 3d 207, 395 N.E.2d 1066 (1979) (action for inducing vendor of real estate to breach its exclusive listing contract with plaintiff realtors; evidence that defendant’s officers saw on property “For Sale” signs with plaintiff ’s name and telephone number); Williams v. Chittenden Trust Co., 145 Vt. 76, 484 A.2d 911 (1984) (owner of condominium project substituted defendant for plaintiff as architect for project; defendant told that plaintiff designed project and given plaintiff ’s drawings). Compare Ryan, Elliott and Co., Inc. v. Leggat, McCall & Werner, Inc., 8 Mass. App. Ct. 686, 396 N.E.2d 1009 (1979) (plaintiff ’s employees employed for term of five years, during which defendant hired them; employees advised defendant that, according to attorney’s advice, they were free to leave plaintiff and intended to do so; fixed-term employment contracts rare in business involved). 3. In Emerald Construction Co. Ltd. v. Lowthian, 1 W.L.R. 691 (C.A.), defendants said they assumed the contract could be terminated on short notice and this lawful termination was all they insisted upon. Lord Denning, M.R., responded: “Even if they did not know of the actual terms of the contract, but had the means of knowledge — which they deliberately disregarded — that would be enough. Like the man who turns a blind eye.... [I]t is unlawful for a third person to procure a breach of contract knowingly, or recklessly, indifferent whether it is a breach or not.” Should this be accepted as a general proposition? When it is found (as in Emerald Construction) that defendants’ intention was to bring the contract to an end whether it was breached or not? What if defendant was aware of the terms of the contract but did not realize that they constituted an obligation inconsistent with what defendant procured — either because of misunderstanding of the terms’ effects or belief that the contract was unenforceable? See Robey v. Sun Record Co., Inc., 242 F.2d 684 (5th Cir. 1957), cert. denied, 355 U.S. 816 (1957) (defendant allegedly believed musician’s record contract invalid because not approved by union; judgment for plaintiff affirmed); American Cyanamid Co. v. Elizabeth Arden Sales Corp., 331 F. Supp. 597 (S.D.N.Y. 1971) (defendant knew of agreement for purchase of corporation but reasonable to believe it not binding; judgment for defendant); State of Minnesota by Burlington Northern Railroad Co. v. Big Stone-Grant Industrial Development and Transportation, L.L.C., 990 F. Supp. 731 (D. Minn. 1997), aff ’d, 131 F.3d 144 (8th Cir. 1997) (defendant liable despite legal opinion that there would not be breach of contract); British Industrial Plastics, Ltd. v. Ferguson, 4 All E.R. 504 (C.A.), aff ’d, 1 All E.R. 479 (H.L.) (defendants knew that co-defendant obligated not to reveal to them secret manufacturing process of plaintiff, but “in a muddle-headed way” believed this did not apply to process that was patentable; no liability); OBG Ltd. v. Allan, A.C. 1 (H.L.) (defendant must realize that there would be breach of contract); Restatement (Second) of Torts § 766, comment i (1979) (defendant can have necessary intent if knew of contract, even if mistaken about its legal effects). Upon the trial of Lumley v. Gye, subsequent to the decision at p. 123, supra, Lord Campbell, C.J., instructed the jury 02 kutner 4e final 3/1/13 12:39 PM Page 132 Copyright © 2013 Carolina Academic Press, LLC. All rights reserved. 132 2 · ECONOMIC RELATIONS that if Gye “bona fide believed” that Lumley’s agreement with Wagner had ceased to be binding upon her, scienter was not proved and Gye was entitled to a verdict. The jury resolved this question in favor of Gye, so there was a verdict in his favor even though the agreement was in fact broken in consequence of his inducement. The Times, February 23, 1854, p. 12. 4. Justification and privilege. Justification for inducing breach may be found in the relationship between defendant and the party who broke the contract. See Restatement (Second) of Torts § 770 (1979). In Lee v. Silver, 262 App. Div. 149, 28 N.Y.S.2d 333 (1941), aff ’d, 287 N.Y. 575, 38 N.E.2d 233 (1941), a mother allegedly induced her daughter, a vocalist, to repudiate her contract with her managers. The court ruled that public policy dictates that parents have an absolute right to advise their minor children, regardless of motive; there could be no liability. Cf. Joel v. Weber, 153 Misc. 2d 549, 581 N.Y.S.2d 579 (Sup. Ct. 1992), in which it was alleged that a musical performer was persuaded by his wife to repudiate the agreement under which plaintiff managed the performer’s business and personal affairs. The court decided that spouses were entitled to an immunity from liability for causing the other spouse to alter business relationships. This would enable spouses to freely discuss “all aspects of domestic economics... without fear of being called to account” for the results. They would not be subject to an inquiry into their motives. Should this be extended to cases in which defendant allegedly acted to protect someone who was not a party to the contract interfered with? In Legris v. Marcotte, 129 Ill. App. 67 (1906), defendant’s little girl was enrolled in a convent school. Defendant informed the mother superior that the father of another pupil was rumored to have a contagious “itching disease.” This allegedly caused the dismissal of the other pupil from the school. Defendant was held to have been justified in her conduct if she acted without malice. What if an employer induces or assists an employee in breaking a contract with unfavorable terms? See Heywood v. Tillson, 75 Me. 225 (1883). 5. Cases recognize a privilege to advise or procure breach of contract for persons who act as a business advisor for a contracting party or as a professional responsible for the party’s interests. See Brown Mackie College v. Graham, 768 F. Supp. 1457 (D. Kan. 1991), aff ’d, 981 F.2d 1149 (10th Cir. 1992) (attorney); Spectra Architectural Group Ltd. v. Eldred Sollows Consulting Ltd., (1991) 80 Alta. R. 2d 361, 119 Alta. R. 13 (Sup. Ct. Master) (architectural consultants). In recognizing that a consultant or other advisor was privileged to offer good-faith advice to a client without liability for inducing breach of contract, the court in J.D. Edwards & Co. v. Podany, 168 F.3d 1020 (7th Cir. 1999), stated that the privilege was qualified in two respects. First, it was limited to advice within the scope of the consultant’s engagement— what the consultant was engaged to advise on by the client. Second, the privilege was forfeited if the consultant did not give honest advice, but rather gave dishonest advice for his own benefit or out of dislike for the victim. If, however, the advice was honest, a consultant’s giving it in order to make money for himself would not be outside the privilege. Restatement of the Law Governing Lawyers § 57(3) (2000) states that a lawyer who advises or assists a client to make or break a contract, or to enter or not enter a contractual relation, is not liable for interference with contract, or with prospective contractual relations, if the lawyer acts to advance the client’s objectives and does not use wrongful means. A lawyer who acts for his own benefit is outside the privilege, but so long as the lawyer acts or advises with the purpose of promoting the client’s welfare, it is immaterial that the lawyer hopes to increase his fees or reputation or takes satisfaction in the consequences to the non-client. Ibid., §57, comment g. In principle, while persuading someone to break a contract is grounds for a tort action, “mere advice” is not. But it can be diffi- 02 kutner 4e final 3/1/13 12:39 PM Page 133 Copyright © 2013 Carolina Academic Press, LLC. All rights reserved. 2 · ECONOMIC RELATIONS 133 cult to distinguish between advice and persuasion. See Carty, An Analysis of the Economic Torts 46–48 (2001). The “privilege” of the advisor protects against liability if persuasion is found. 6. Brimelow v. Casson, discussed in the Camden Nominees case, was an action by the manager of a touring pantomime company, the Wu Tut Tut Revue. Defendants, officers of a joint committee of theatrical unions, sought to prevent plaintiff from presenting performances by inducing theatre proprietors to break or refrain from entering contracts with him. Their object was to require plaintiff to pay his chorus girls the minimum wage set by the Actors’ Association. Defendants had discovered that plaintiff paid so little that the chorus girls led a “hand-to-mouth existence” and some resorted to prostitution — common effects of failure to pay a theatrical troupe a living wage. Russell, J., was much affected by evidence of an eighteen-year-old “forced by underpayment to continue in sexual association” with a “dwarf ” who was also a member of the company. He held that defendants had justification and, therefore, were not liable. Inducing theatre proprietors to deny plaintiff the use of theatres was the only means by which unions could end the underpayment and its evil consequences. 7. Is there a comparable “public interest” justification for interfering with a contract with the object of preventing degradation of the environment or overcharging in government contracts? See Middlesex Concrete Products and Excavating Corp. v. Carteret Industrial Association, 37 N.J. 507, 181 A.2d 774 (1962). What if the object is preventing racial or sexual discrimination? In furtherance of a boycott of the city of Cincinnati, intended to punish the city and obtain redress for grievances over the treatment of blacks and other minorities in the city, leading entertainers were persuaded not to perform in the city. This allegedly included persuading entertainers not to honor existing contracts with the Cincinnati Arts Association, a non-profit organization that operated performing arts venues in Cincinnati. The boycott’s organizers had no grievance against the CAA specifically. The CAA sued the boycott organizers for interference with contract and conspiracy. The court held that their conduct was political speech protected by the First Amendment and defendants therefore had justification that barred liability. Cincinnati Arts Association v. Jones, 120 Ohio Misc. 2d 26, 777 N.E.2d 346 (C.P. 2002). 8. Breach of contract by a business is often advised or otherwise caused by an officer, director or employee of the business. This is necessarily the case when the business is a corporation. The officer, director or employee will not be held liable for interference with contract if he acted for the interest of the business and within the scope of his authority or employment. See Swager v. Couri, 77 Ill. 2d 173, 395 N.E.2d 921 (1979); Gruhlke v. Sioux Empire Federal Credit Union, Inc., 756 N.W.2d 399 (S.D. 2008); Said v. Butt, 3 K.B. 497. What effect should be given to allegations that defendant acted with bad motives or to advance his own career or business interests? See Los Angeles Airways, Inc. v. Davis, 687 F.2d 321 (9th Cir. 1982); Nordling v. Northern States Power Co., 478 N.W.2d 498 (Minn. 1991); Boers v. Payline Systems, Inc., 141 Or. App. 238, 918 P.2d 432 (1996). 9. When a company is wholly owned by one party or a small number of related parties, the company and its owner(s) may be treated as one entity. If so, plaintiff cannot establish third party interference with the contract if the owner interferes. Schoellkopf v. Pledger, 778 S.W.2d 897 (Tex. App. 1989). But see Shapoff v. Scull, 222 Cal. App. 3d 1457, 272 Cal. Rptr. 480 (1990) (owner may be liable if not acting to protect interests of company); Waste Conversion Systems, Inc. v. Greenstone Industries, Inc., 33 S.W.3d 779 (Tenn. 2000) (parent corporation may be liable if acted contrary to subsidiary’s economic interests or employed wrongful means). Should a city mayor, council member or agency director be subject to liability for causing breach of a contract the city 02 kutner 4e final 3/1/13 12:39 PM Page 134 Copyright © 2013 Carolina Academic Press, LLC. All rights reserved. 134 2 · ECONOMIC RELATIONS had entered? See DeCarlo v. Sullivan, 981 F. Supp. 59 (D. Mass. 1997) (councillor liable for interfering with city employee’s contract with improper motives or means); Jolicoeur Furniture Co., Inc. v. Baldelli, 653 A.2d 740 (R.I. 1995), cert. denied, 516 U.S. 964 (1995) (mayor and planning director liable for interfering with sale of land to plaintiffs without justification). ————— Sweeney v. Smith United States Circuit Court, Eastern District of Pennsylvania 167 F. 385 (1909), aff’d, 171 F. 645 (3d Cir. 1909), cert. denied, 215 U.S. 600 (1909) J.B. McPHERSON, District Judge.... [The bondholders of an insolvent company put their interests in the hands of a committee. The committee made a contract with Sweeney by which he was to acquire a controlling interest in the company’s stock and bonds. The contract fixed no time limit for performance and was never carried out. The committee subsequently made a substantially similar contract with defendants. It was carried out. Sweeney brought a bill in equity to recover the profit made by defendants’ use of the bonds.]... [W]hile it may be supposed that the complainant meant to charge that Smith & Co. interfered with the carrying out of his contract of September 12th, and persuaded or induced the committee to break that contract, no such charge appears in the bill. The only complaint is that Smith & Co. had prior knowledge of the complainant’s contract when they began the negotiations that resulted in the agreement of January 25th. Under all the authorities the bill is fatally defective on this point.... The promisor may have excellent reasons for declining to be bound by the earlier contract, and these he need not disclose. If he chooses to take the risk of breaking the first agreement, that is his own affair, which may make him liable on that agreement, but imposes no obligation on the second promisee. It is enough for the second promisee that the agreement is now offered to him without his own procurement or persuasion. If he has done nothing to bring the situation about, the mere fact that he knew of the first contract is no bar to his entering upon the second. Mere knowledge of the first does not make the second an actionable wrong; he is under no legal obligation to insist upon being told why the promisor declines to carry out the first contract, and is not bound to weigh these reasons and decide at his peril whether they are good or bad. Before he can be called to account, some legal ground of liability must appear; he must participate in the breach before he can be held to blame; and the mere knowledge that the promisor intends to break the contract with the first promisee is not wrongful in itself, and does not disable the second promisee from making the subsequent contract. To be blameworthy, he must take some active step to bring about the breach. At the least, he must induce or persuade the promisor to abandon the earlier agreement, and even this he may sometimes do with impunity, unless the decisions in several jurisdictions are to be regarded as erroneous. Take the case of two trade competitors: One makes a contract with a customer; the other, knowing that the contract has been made, persuades the customer by fair and legitimate arguments that his wares are better than his rival’s, and thus induces the customer to cancel the contract. In such a situation, I am not aware of any decision that would support a suit against the second merchant, although he has unquestionably interfered actively to supplant his rival.... The demurrer of Smith & Co. is therefore sustained.... 02 kutner 4e final 3/1/13 12:39 PM Page 135 Copyright © 2013 Carolina Academic Press, LLC. All rights reserved. 2 · ECONOMIC RELATIONS 135 Notes 1. Active persuasion or inducement of breach of contract is required for liability. It is not enough that defendant entered into a contract with knowledge of a prior inconsistent one. See Lamport v. 4175 Broadway, Inc., 6 F. Supp. 923 (S.D.N.Y. 1934); Wolf v. Perry, 65 N.M. 457, 339 P.2d 679 (1959). But see Fowler v. Printers II, Inc., 89 Md. App. 448, 598 A.2d 794 (1991), cert. denied, 325 Md. 619, 602 A.2d 710 (1992) (sufficient that defendant employed contracting party in work violative of covenant not to compete). Defendant may be liable if, with knowledge of a prior inconsistent contract, he has taken an active part in holding out an incentive, such as a better price or better terms, to induce a party to the prior contract to make an incompatible agreement. See Cumberland Glass Manufacturing Co. v. De Witt, 120 Md. 381, 87 A. 927 (1913), aff’d, 237 U.S. 447 (1915); Williams v. Chittenden Trust Co., 145 Vt. 76, 484 A.2d 911 (1984). But it is thought that “regular advertising and general solicitation of business” is not a basis of liability. See V. Marangi Carting Corp. v. Judex Enterprises, Inc., 171 Misc. 2d 820, 655 N.Y.S.2d 832 (Sup. Ct. 1997); Restatement (Second) of Torts § 766, comment m (1979). Suppose an agreement is negotiated before defendant learns that the other party had entered an inconsistent contract. Is defendant subject to liability for going through with the deal agreed upon? 2. In Amatrudi v. Watson, 19 N.J. Super. 67, 88 A.2d 7 (App. Div. 1952), plaintiff ’s evidence was that defendant met plaintiff ’s work crew while they were out on a job. Defendant asked the crew to do some work that afternoon for him. The foreman told defendant to call at plaintiff ’s office for an estimate. But when defendant replied “Does the boss have to know about it?” the crew agreed to do the work for a payment that they split among themselves. They therefore worked for their own account rather than for plaintiff ’s during the afternoon. Liability? 3. It has been said that a two-step “but for” approach is employed in determining whether defendant tortiously brought about a breach of contract: (1) Did defendant actively and affirmatively take steps to induce breach? (2) If so, would the contract have been performed absent defendant’s interference? Tri-Continental Leasing Co. v. Neidhardt, 540 S.W.2d 210 (Mo. App. 1976) (distributor of laundry equipment actively induced lessee’s breach of agreement; evidence that lessee had intended to terminate contract with plaintifflessor regardless of anything distributor might have done). Cf. Jones Brothers (Hunstanton) Ltd. v. Stevens, 1 Q.B. 275 (C.A.) (no liability for employing worker under contract to plaintiff if worker would not in any event have returned to employment with plaintiff). ————— Wilkinson v. Powe Supreme Court of Michigan 300 Mich. 275, 1 N.W.2d 539 (1942) BUSHNELL, Justice. Plaintiff Jay D. Wilkinson brought this action against defendants Powe and Stinson, individually and doing business as Shamrock Creamery, charging them with wrongfully procuring a breach of plaintiff ’s contract with certain farmers to haul their milk. [Plaintiff had hauled farmers’ milk to creameries for several years. The farmers entered a written agreement with plaintiff covering the year 1937.] Shortly after the execution of the written agreement, defendant Powe told the Wilkinsons that he wanted to take over the larger route and offered in exchange for the route the 02 kutner 4e final 3/1/13 12:39 PM Page 136 Copyright © 2013 Carolina Academic Press, LLC. All rights reserved. 136 2 · ECONOMIC RELATIONS trade-in value of plaintiff ’s old truck, and told plaintiff he would give him a job in the creamery. Plaintiff then informed Powe of the existence of the written contract and refused to give up the route. About three months later Powe informed plaintiff that he would be required to replace the open stake racks on his trucks with insulated bodies because of a municipal ordinance. After plaintiff made this change in his trucks, he was unable to get his trucks into the creamery and the milk had to be handled by hand. This led to friction between the parties. On May 29, 1937, defendant Powe sent a letter to the farmers doing business with plaintiff, worded as follows: “For reasons which are vital to our business, we the Shamrock Creamery, have decided that on and after June 1st, we will purchase no milk except that which is picked up by our own trucks at the farm. [¶] Nothing on your part has occasioned or made necessary this change, and we are hopeful that you will continue to sell us your milk. Pursuant to the change made, our trucks will call at your place Tuesday afternoon, June 1st, to pick up your milk, if you desire to continue business with us.”... Wilkinson was unable to find another suitable market for milk after June 10th and was soon forced to abandon his routes. Defendants have since hauled the milk of practically all the farmers formerly under contract with plaintiff. Plaintiff alleged in his declaration that defendants’ object was to prevent him from protecting the farmers on his routes from false, fraudulent, and dishonest practices in the testing, weighing and price paid for milk. This was denied by defendants. They claimed their reason for deciding to haul the milk was that plaintiff failed to deliver the milk on time or in a proper condition, and that the action was taken to protect themselves and their customers by insuring a steady supply of good cream and wholesome milk. The testimony is in conflict on this point; but since the jury found for plaintiff, it must be assumed that they resolved this question against the defendants.... [T]he trial judge entered a judgment for no cause of action.... The court stated that “the case at bar does not permit of any speculation on the element of falsehood or deceit which would amount to fraud, leaving then only for consideration, whether or not the action of the defendant could be construed factually as the application wrongfully of pressure and force.” [In the trial court’s opinion]... “The jury verdict must be predicated upon a circumstance which does not take into consideration the defendants’ right to discontinue its source of supply at any time. To find for the plaintiff is a sympathetic attempt to give legal security to one, who, in a precarious position acted unwisely.... Without their acceptance (defendants) of the product the routes had no value. Lawful action, not unlawful action, then eliminated any value the routes may have had.” If the trial court is to be sustained, the judgment must stand on one of two grounds; first, that, in procuring the breach of contract, defendants were exercising what is often designated as a “superior” or “absolute” right, i.e., to refuse to accept further delivery of milk from plaintiff and, therefore, no justification was necessary; or second, that the injury, if any, was the result of defendants’ refusal to accept deliveries of milk from plaintiff, and the breach of contract by the farmers was not the proximate cause of plaintiff’s injury. Morgan v. Andrews, 107 Mich. 33, 64 N.W. 869... approves the general proposition... that: “Merely to persuade a person to break his contract may not be wrongful in law or fact; still, if the persuasion be used for the indirect purpose of injuring the plaintiff, or benefiting the defendant at the expense of the plaintiff, it is a malicious act, which, in law and in fact, is a wrongful act, and therefore an actionable act, if injury issues from it.” 02 kutner 4e final 3/1/13 12:39 PM Page 137 Copyright © 2013 Carolina Academic Press, LLC. All rights reserved. 2 · ECONOMIC RELATIONS 137 A prima facie case is established when plaintiff proves the intentional procurement of a breach of contract, and, upon such proof, it becomes incumbent upon defendant to show justification.... No categorical answer can be made to the question of what will constitute justification, and it is usually held that this question is one for the jury. The language in some of the cases supports defendants’ contention that they acted under a “superior” or “absolute” right in refusing to accept further deliveries of milk by plaintiff, and that, under those circumstances, their action requires no justification. If the defendants in the instant case had merely refused to accept further delivery of milk by plaintiff, they would have been clearly within their legal rights, although this would have resulted in a breach of contract between plaintiff and the farmers. But defendants did more. Their letters... show active solicitation of a breach of the contract and their refusal to accept delivery of milk was merely another step in bringing about the breach. Almost analogous facts, so far as the principle is concerned, are found in Knickerbocker Ice Co. v. Gardiner Dairy Co., 107 Md. 556, 69 A. 405. In the Gardiner case, plaintiff Gardiner Company was engaged in the dairy business and required a large quantity of ice during the spring and summer months. In order to meet its requirements it entered into a contract with the Sumwalt Company to deliver not exceeding 20 tons of ice a day until the completion of plaintiff ’s plant, then in the course of construction, at a price of $5 per ton, delivered. Sumwalt at the time was purchasing ice in large quantities from the defendant, Knickerbocker Ice Company, and when defendant learned of the contract between Gardiner and Sumwalt, it notified Sumwalt that it would refuse to deliver any ice whatever to it unless it refrained from delivering ice to Gardiner. Being compelled by the exigencies of its business to secure ice from Knickerbocker, and alarmed by the threat, Sumwalt breached its contract with Gardiner and advised it that this was done because of the action of Knickerbocker. Gardiner was thereby compelled to purchase ice directly from Knickerbocker at a price considerably greater and on less advantageous terms. The court... held that: “If the Knickerbocker Company had simply refused to furnish the Sumwalt Company with ice, the Gardiner Company would not for that reason alone have a remedy against the Knickerbocker Company. Such action would not necessarily be unlawful or wrongful, but, if the Knickerbocker Company refused to furnish the Sumwalt Company if it furnished the Gardiner Company, although it knew it was under contract to do so, in order to get the business of the Gardiner Company for itself on it own terms, then it was unlawful to thus interfere with the contract between the Sumwalt Company and the Gardiner Company.”... Defendants’ refusal to accept further deliveries of milk by plaintiff was wrongful in the light of the evidence in the instant case because it was done to accomplish an unlawful purpose, i. e., to bring about a breach of contract. It therefore follows that the problem of proximate cause disappears from consideration in the case. Defendants cannot be heard to say that they should not be held liable for the injury caused plaintiff by their unlawful acts merely because they could have caused the same injury by a lawful act.... [Reversed and remanded for entry of judgment for plaintiff.] Notes 1. Consider the variables at work in the principal case and the precedents discussed therein, including active procurement of the breach of contract, purpose, “competitive” motives and effects, and defendants’ rights of contract and control of property. Which explain 02 kutner 4e final 3/1/13 12:39 PM Page 138 Copyright © 2013 Carolina Academic Press, LLC. All rights reserved. 138 2 · ECONOMIC RELATIONS decisions on liability? Is the fact that defendant has no pre-existing contract inconsistent with plaintiff ’s critical? What if defendant conditions a purchase of property on defendant’s or a third person’s being the broker for the sale, causing a broker retained by the seller to lose an expected commission? See Katz v. Thompson, 19 Misc. 2d 848, 189 N.Y.S.2d 982 (Co. Ct. 1959), aff ’d, 9 A.D.2d 951, 196 N.Y.S.2d 578 (1959), appeal denied, 10 A.D.2d 630, 197 N.Y.S.2d 439 (1960). Will a lender be subject to liability for conditioning credit on measures that secure repayment but also interfere with existing contracts? See Nitzberg v. Zalesky, 370 So. 2d 389 (Fla. App. 1979) (lender required debtor to cut costs, resulting in reduction of employee’s pay); Edwin Hill and Partners v. First National Finance Corp. Plc., 1 W.L.R. 225 (C.A.) (bankers who held mortgage on development property provided additional finance to developer, who was unable to repay loan or secure finance from other sources, on condition that architects be replaced by prestigious firm). On whether union members can lawfully condition their labor on nonperformance of certain contracts, see pp. 146–152, infra. 2. Sometimes a person may, by undertaking a particular business, employment or transaction, impliedly consent to a degree of control and possible interference by a third party. In Posluns v. Toronto Stock Exchange, 2 O.R. 547, (1964) 46 D.L.R.2d 210 (High Ct.), aff ’d, 1 O.R. 285, (1965) 53 D.L.R.2d 193 (C.A.), aff ’d, S.C.R. 330, (1968) 67 D.L.R.2d 165, a stock exchange withdrew permission for plaintiff to serve as a shareholder, director or employee of a member company because he was found to have a conflict of interest. Such action resulted almost inevitably — as the exchange intended — in plaintiff ’s being discharged by the company. It was held that the agreement between the member company and its employee impliedly gave the exchange a right of control over the employee’s conduct, justifying the interference with the contract of employment. Cf. O’Brien v. Western Union Telegraph Co., 62 Wash. 598, 114 P. 441 (1911) (telegraph company leased wires to press association, with condition that association’s telegraph operators be satisfactory to company; plaintiff fired by association from job as operator at request of telegraph company). 3. To what extent does competition justify interference with a business rival’s contract? It is generally held that a person is not justified in causing a breach of contract simply because he is in competition with one of the parties to that contract and is seeking to further his own economic advantage. See White Plains Coat & Apron Co., Inc. v. Cintas Corp., 8 N.Y.3d 422, 835 N.Y.S.2d 530, 867 N.E.2d 381 (2007) (competitor of plaintiff allegedly induced plaintiff ’s customers to break exclusive contracts to rent linen products from plaintiff and enter rental agreements with defendant); Imperial Ice Co. v. Rossier, 18 Cal. 2d 33, 112 P.2d 631 (1941) (action stated against ice manufacturers who induced party, who had agreed not to sell ice in certain territory, to violate agreement in order that manufacturers might sell him ice); Fowler v. Printers II, Inc., p. 135, supra (liability for employing former employee of plaintiff in sales work violating her covenant not to compete with plaintiff). Notice the various effects upon competition caused by defendants’ interference with contract in the principal and note cases. 4. Interference with a contract is considered justified if defendant is acting to protect a contractual relationship of its own. See Tidal Western Oil Corp. v. Shackelford, 297 S.W. 279 (Tex. Civ. App. 1927) (defendant oil company caused another oil company to stop taking oil from plaintiff under lease by asserting right to oil under prior contract). In Quinlivan v. Brown Oil Co., 96 Mont. 147, 29 P.2d 374 (1934), the lessee of a service station had agreed with the lessor oil company to maintain the price charged at the lessor’s other stations. The company was held justified in requiring the lessee to withdraw from a contract which reduced the price. A franchisor may act to protect its relationship with 02 kutner 4e final 3/1/13 12:39 PM Page 139 Copyright © 2013 Carolina Academic Press, LLC. All rights reserved. 2 · ECONOMIC RELATIONS 139 a franchisee. It might incur liability if its conduct is found to be malicious. See Team Central, Inc. v. Teamco, Inc., 271 N.W.2d 914 (Iowa 1978) (franchisor falsely and maliciously represented that it would buy franchisee’s assets and take over operation of its stores and induced third party to abandon plans to purchase franchisee). But in the Quinlivan case it is said that certain “absolute rights” — rights incident to ownership of property, rights growing out of contractual relations, and the right to enter or refuse to enter contractual relations — may be exercised without regard to motive. If interference with contract is justified to protect an interest in a contract with a third party, why isn’t it justified to protect an interest in a contract with plaintiff, as in Camden Nominees, Ltd. v. Forcey, p. 128, supra? 5. A person may be permitted to act in protection of an existing economic interest, such as an investment or interest in property, despite resulting interference with another person’s contract. See Bendix Corp. v. Adams, 610 P.2d 24 (Alaska 1980) (parent corporation’s interference with subsidiary’s contract); RAN Corp. v. Hudesman, 823 P.2d 646 (Alaska 1991) (lessor’s interference with assignment of property by lessee); Meason v. Ralston Purina Co., 56 Ariz. 291, 107 P.2d 224 (1940) (feed seller holding mortgage on flock of turkeys interfered with sale of turkeys); Restatement (Second) of Torts § 769 (1979). Compare Fury Imports, Inc. v. Shakespeare Co., 554 F.2d 1376 (5th Cir. 1977) (foreign company manufactured fishing reels for both plaintiff and defendant; liability for inducing company to cease supplying plaintiff if purpose was to eliminate competitor rather than to preserve defendant’s financial interests (shares, debt, continued source of supply) in company). In Knapp v. Penfield, 143 Misc. 132, 256 N.Y.S. 41 (Sup. Ct. 1932), a former Miss America was hired for the lead role in a musical. The play’s promoter and the promoter’s agent believed she lacked the singing and dancing ability required for the part and brought pressure — eventually including legal action — against the producer to have another performer substituted. As a result, she was discharged from the production. The court held that the interference with the performance contract by the promoter and the agent was a justified act of protecting their investment. Should justification for tort purposes of any broader or narrower than justification for purposes of liability for the breach of contract? 6. What if defendant does not cause an actual repudiation or breach of a contract, but only a modification of the contract’s terms to plaintiff’s detriment, as when plaintiff is deprived of the right to be the exclusive recipient of a product? See Hannigan v. Sears, Roebuck and Co., 410 F.2d 285 (7th Cir. 1969), cert. denied, 396 U.S. 902 (1969), in which the contract provided that a manufacturer would produce cabinets exclusively for plaintiffs. Defendant acted to have the manufacturer sell cabinets directly to defendant, so that it would not have to buy from plaintiffs, though plaintiffs were to be given a 10% commission on each cabinet sold. A cause of action was found. ————— United Truck Leasing Corporation v. Geltman Supreme Judicial Court of Massachusetts 406 Mass. 811, 551 N.E.2d 20 (1990) WILKINS, Justice.... It is common ground that, in an action for intentional interference with a contract, the plaintiff must prove that (1) he had a contract with a third party, (2) the defendant knowingly induced the third party to break that contract, and (3) the plaintiff was harmed by 02 kutner 4e final 3/1/13 12:39 PM Page 140 Copyright © 2013 Carolina Academic Press, LLC. All rights reserved. 140 2 · ECONOMIC RELATIONS the defendant’s actions. The disputed point is whether the plaintiff must also prove something more, namely, that a defendant’s conduct was wrongful or improper in some way. The trial judge recognized that our cases have said that justification for one’s conduct is an affirmative defense to be proved by the defendant, but he concluded, relying on principles set forth in the Restatement (Second) of Torts § 767 (1979), that, before the matter of justification need be faced, a plaintiff must prove that what the defendant intentionally did was “wrongful or improper in its means or its ends.”... Geltman, an officer of the defendant corporation, counsels companies that lease trucks. He educates his customers about the truck leasing business so that they may obtain more favorable leases. He helps in soliciting and critiquing bids from lessors and sometimes negotiates leases. Geltman also attempts to obtain changes in existing leases that will be beneficial to his clients. The plaintiff (United) operates a large truck leasing company in the Commonwealth. United’s claim for intentional interference with a contract is based on its claim that Geltman caused one of his customers (Universal Fixtures) to break its contract with United and to enter into a lease with Flexi-Van, the lessor with whom Universal Fixtures had had a lease prior to its lease with United. It is clear, on the plaintiff ’s evidence, that Geltman knew of the existing lease between United and Universal Fixtures and recognized the possibility that, if Universal Fixtures signed on with Flexi-Van, United might sue Universal Fixtures for breach of contract. There was evidence that United lost $60,000 because of Universal Fixtures’s repudiation of the contract. United’s claim for intentional interference with prospective contractual relations concerns United’s inability to obtain a lease with Matthew’s Salad House (Matthew’s). United had been trying to arrange a lease with Matthew’s for about six years. Matthew’s retained Geltman to advise it concerning the lease of refrigerated trucks. Geltman did not invite United to bid on the Matthew’s account, although there were good reasons why United might have been invited to do so. When asked by a United representative why he had not invited United to bid, Geltman replied that other leasing companies gave him leads for new accounts but that United did not. After learning the amount of its competitor’s bid, United did bid on the Matthew’s account but was not awarded the account. The trial judge directed a verdict for the defendants.... We start with the observation that malice, in the sense of ill will, has not been a true element of the torts of intentional interference either with a contract or with a prospective contractual relation. Some of our cases have used the word but, in the same breath, have eliminated any requirement of independent proof of malice. See Keegan v. O’Donnell, 310 Mass. 346, 350, 37 N.E.2d 995 (1941) (“intentional interference with the plaintiff ’s business, in the absence of any legal justification, was malicious in law and entitled the plaintiff to damages”); Anderson v. Moskovitz, 260 Mass. 523, 526, 157 N.E. 601 (1927) (“Malice is proved if it appears that the defendant with knowledge of the contract intentionally and without justification induced one of the contracting parties to break it”). This formulation of the tort, intentional interference without privilege to do so, is generally consistent with the rule stated in the first Restatement. More recently, we have expressed the view that a plaintiff must prove, among other things, “the defendant’s intentional and malicious interference with” a business relationship or contemplated contract of economic benefit. See ELM Medical Laboratory, Inc. v. RKO Gen., Inc., 403 Mass. 779, 787, 532 N.E.2d 675 (1989).... In this opinion, we adopt the word “improperly” in place of the word “maliciously.” In doing so we agree that more than intentional interference must be established. “Im- 02 kutner 4e final 3/1/13 12:39 PM Page 141 Copyright © 2013 Carolina Academic Press, LLC. All rights reserved. 2 · ECONOMIC RELATIONS 141 properly” is the word used in the Restatement (Second) of Torts §766 (1979)7 (“intentionally and improperly interferes”). It is the concept the trial judge relied on in directing verdicts in this case. We accept it, as does the Restatement (Second) of Torts, as an element both in the proof of intentional interference with performance of a contract (§ 766) and in the proof of intentional interference with a prospective contractual relationship (§766B). In deciding what conduct is improper, we accept the standard expressed in... Top Serv. Body Shop, Inc. v. Allstate Ins. Co., 283 Or. 201, 209–210, 582 P.2d 1365 (1978) (“In summary, [a claim of tort liability for intentional interference with contractual or other economic relations] is made out when interference resulting in injury to another is wrongful by some measure beyond the fact of interference itself. Defendant’s liability may arise from improper motives or from the use of improper means.... No question of privilege arises unless the interference would be wrongful but for the privilege; it becomes an issue only if the acts charged would be tortious on the part of an unprivileged defendant”); Leigh Furniture & Carpet Co. v. Isom, 657 P.2d 293, 304 (Utah 1982) (“improper purpose or by improper means”); Blake v. Levy, 191 Conn. 257, 262, 464 A.2d 52 (1983) (“the better reasoned approach requires the plaintiff to plead and prove at least some improper motive or improper means”). In [Comey v. Hill, 387 Mass. 11, 19, 438 N.E.2d 811 (1982)] we applied this standard by recognizing liability where the defendant’s intentional interference with the plaintiff ’s employment contract was based on unfair age discrimination, an improper motive.... The evidence does not warrant a finding that Geltman violated a statute or a rule of common law. There is no evidence that he used threats, misrepresented any facts, defamed anyone, or used any other improper means in relation to either the existing contract or the prospective one. His apparent motives were to benefit his customers and himself financially. There is not enough evidence to warrant a finding that his real motive in these matters was to hurt United. The judge properly allowed the motion for a directed verdict on the claims we have considered in this appeal. Judgment of the Superior Court affirmed. Notes 1. Tort law has long drawn a sharp distinction between intentionally causing a breach of contract and intentionally causing a contract to be lawfully terminated or not entered into. See pp. 143–152, 164–200, infra. Consider the reasons for this and whether it is desirable to apply common principles of liability to all of these situations. Would it be satisfactory to have a common “blackletter” rule but have different standards of what is “improper” interference for each category of case? 2. So far, the influence of the Restatement (Second) reformulation of liability has been seen primarily in cases of interference with prospective contractual relations, e.g. depriving plaintiff of an opportunity to make sales, and cases of inducing termination of contracts. Some cases refer to the presence or absence of improper means or improper 7. Section 766 reads as follows: “One who intentionally and improperly interferes with the performance of a contract (except a contract to marry) between another and a third person by inducing or otherwise causing the third person not to perform the contract, is subject to liability to the other for the pecuniary loss resulting to the other from the failure of the third person to perform the contract.” 02 kutner 4e final 3/1/13 12:39 PM Page 142 Copyright © 2013 Carolina Academic Press, LLC. All rights reserved. 142 2 · ECONOMIC RELATIONS motives in deciding whether causing breach of contract was justified. E.g. National Right To Life Political Action Committee v. Friends of Bryan, 741 F. Supp. 807 (D. Nev. 1990). Potential liability for interference with contract might be limited by requiring some purpose to interfere with the contract or harm plaintiff rather than knowing interference. But this does not have much support in contemporary law. Differentiating liability for interference with existing contracts and liability for interference with prospective economic relations, the Supreme Court of California has held that an element of wrongfulness in defendant’s conduct independent of the inducement to breach the contract was not a requirement of liability and that there could be liability without a primary purpose to disrupt the contract. Knowledge that the interference would occur was sufficient. That a legitimate business purpose might constitute justification was, however, recognized. Quelimane Co., Inc. v. Stewart Title Guaranty Co., 19 Cal. 4th 26, 77 Cal. Rptr. 2d 709, 960 P.2d 513 (1998). 3. In Winkler v. V.G. Reed & Sons, Inc., 638 N.E.2d 1228 (Ind. 1994), plaintiff had a fifteen-year contract as general manager of a printing and typesetting company. He was discharged two years into the contract as a result of a transaction in which defendant acquired the assets of the company and assumed its loans but did not assume obligations under existing employment agreements. The company ceased all business activity upon the completion of this transaction. It had been nearly insolvent because its primary lender refused to renew outstanding loans. Evidently, defendant intended to use the company’s assets to create a profitable enterprise. The court found justification for interference with plaintiff ’s employment contract in the interests of the other parties in being able to freely purchase and sell a business in a legitimate transaction having no motive to injure the employees whose contracts were broken. Plaintiff ’s interests, the court thought, were adequately protected by his remedy for breach of contract. Will this approach be extended to cases in which defendant induces breach of contract by offering a contracting party more favorable terms or conditions than in the contract with plaintiff? See Forehand v. Perlis Realty Co., 198 Ga. App. 165, 400 S.E.2d 644 (1990) (defendant induced tenant of plaintiff ’s shopping center to move to shopping center owned by defendant, which tenant considered better location for its business; judgment for defendant affirmed); Peoples Security Life Insurance Co. v. Hooks, 322 N.C. 216, 367 S.E.2d 647 (1988) (competitor hired nineteen of plaintiff ’s employees in violation of their covenants not to compete). 4. Are some contracts so personal in nature that no privilege to interfere should be recognized? This may be true of contracts between physician and patient. See Hammonds v. Aetna Casualty & Surety Co., 237 F. Supp. 96 (N.D. Ohio 1965) (malpractice insurer advised doctor to discontinue treating plaintiff, who was considered potential claimant); National Life & Accident Insurance Co. v. Wallace, 162 Okla. 174, 21 P.2d 492 (1933) (insurance company notified policyholders that it would not pay sickness or accident claims certified by plaintiff as attending physician). But see Waldroup v. Lindman, 28 P.3d 293 (Alaska 2001) (insurer privileged because of direct financial interest). If a family member or friend of the patient believes a physician is not proficient, is it tortious to persuade the patient to discharge the physician? See generally Annot., Liability for Interference with Physician-Patient Relationship, 87 A.L.R.4th 845 (1991). 5. For a critique of interference with contract liability on grounds, inter alia, of its anticompetitive effects and deterrence of economically efficient breaches of contract, see Comment, Intentional Interference with Contract: Market Efficiency and Individual Liberty Considerations, 27 Conn. L. Rev. 279 (1994). See also Remington, Intentional Interference with Contract and the Doctrine of Efficient Breach: Fine Tuning the Notion of the Con- 02 kutner 4e final 3/1/13 12:39 PM Page 143 Copyright © 2013 Carolina Academic Press, LLC. All rights reserved. 2 · ECONOMIC RELATIONS 143 tract Breacher as Wrongdoer, 47 Buffalo L. Rev. 645 (1999); Woodward, Contractarians, Community, and the Tort of Interference with Contract, 80 Minn. L. Rev. 1103 (1996). B. Inducing Termination of Contract ————— Terry v. Dairymen’s League Co-Operative Association, Inc. Supreme Court of New York, Appellate Division 2 A.D.2d 494, 157 N.Y.S.2d 71 (1956) HALPERN, Justice. The plaintiff has recovered a substantial judgment for damages upon the theory that the defendant maliciously induced the breach of trucking contracts which had been entered into between the plaintiff and a number of dairy farmers.... The plaintiff was engaged in the business of hauling milk from various dairy farms in the vicinity of Downsville, New York, to the defendant’s milk plant at Margaretville, New York. The defendant, as its name indicates, is a co-operative association of dairy farmers. The farmers with whom the plaintiff had contracted for trucking were all members of the defendant association.... [T]he defendant decided to close [its] Downsville plant and to transfer the patronage of the farmers in that area to its Margaretville plant, about 20 miles away. There obviously was not enough business to sustain several truckers and the defendant selected the plaintiff and one Williams as the two truckers who would serve the farmers in the Downsville area and bring their milk to Margaretville. While the defendant had operated its plant at Downsville, the cost of hauling the milk to the plant had been borne wholly by the farmers.... Because of the longer haul to Margaretville, the defendant agreed to contribute... an additional payment to the truckers. The contract of transportation was in each instance made orally between the farmer and the trucker but, since it was not economically feasible for a trucker to engage in the business of transporting milk unless he had a substantial number of customers along the same route, the farmers had to act cooperatively in arranging for the services of a trucker. The farmers, as members of the defendant, naturally looked to the defendant to make the arrangements for the trucking. As an executive of the defendant testified, the defendant regarded it as part of its responsibility to see to it that suitable trucking service was made available, even though under its contracts with the farmers for the purchase of milk, it was the legal obligation of the farmers to deliver the milk to the plant....... [S]everal of the dairy farmers on the plaintiff ’s route ceased to operate, with the result that in 1953 the plaintiff had only 13 customers left. The plaintiff contended that this volume of business did not produce a sufficient income at the rates currently paid. He complained about this from time to time to his farmer customers and to the officials of the defendant. The situation came to a head late in 1953.... [T]he defendant’s representatives told him that they could not pay him any more money, and they pointed out that Williams, the other trucker, was willing to continue at the agreed rates.... [T]here is a dispute as to whether the plaintiff gave notice of his intention to quit. The plaintiff denies that he did but the defendant claims that the plaintiff stated unequivocally that, if more money was not forthcoming, he would cease to haul the milk on the following Monday.... [T]he defendant’s field representative and its plant manager made arrangements with Williams to take over the plaintiff ’s route as well as to carry on his own route 02 kutner 4e final 3/1/13 12:39 PM Page 144 Copyright © 2013 Carolina Academic Press, LLC. All rights reserved. 144 2 · ECONOMIC RELATIONS and they then notified all the farmers whom they were able to find at home, of the change in the arrangements. According to their testimony, they advised the farmers that they were, of course, free to make any trucking arrangements that they wished but that Williams would be available to haul the milk after Monday, if they wished to have him do so. Practically all the farmers whom they interviewed, constituting a majority of the farmers on the plaintiff ’s route, acquiesced in the change. Accordingly, on Monday, November 9, after the plaintiff had delivered a truckload of milk at the defendant’s plant, the defendant declined to return the empty milk cans to the plaintiff but turned them over to Williams who, in regular course, returned them to the farmers. Thereafter, the farmers continued to ship their milk by Williams’ truck, without protest or objection.... It is undisputed that the oral contracts between the plaintiff and the farmers were terminable at will and that the agreement of the defendant to pay a subsidy was also terminable at will. The plaintiff, nevertheless, characterized his action as an action for damages for maliciously inducing the breach of the contracts between himself and the farmers. Since the contracts were terminable at will, the discontinuance of the plaintiff ’s services, however induced, could not constitute a breach of contract. The action must, therefore, be regarded as one for damages for inducing the discontinuance of business relations rather than as one for the inducing of a breach of contract. It is settled that such an action can be maintained only upon a showing that the defendant acted solely out of a malicious desire to injure the plaintiff, without any expectation of furthering its own business interests. The trial court correctly charged the jury:... “And the action is brought upon the theory that this defendant maliciously and without legal or social justification caused these producers to discontinue the plaintiff’s services. If the defendant deprived the plaintiff of his employment by means not in themselves unlawful, by acts not in themselves unlawful, have [sic] any proper purpose to serve, they are not liable for any damage they caused. The genesis which will make a lawful act unlawful must be a malicious one, unmixed with any other, and exclusively directed to injury and damage of another. [¶] In other words it is incumbent upon the plaintiff to establish to your satisfaction that the action of the defendant was without legal or social justification; that their action was not motivated by a proper desire.”... It is virtually undisputed that the verdict cannot be allowed to stand upon the theory upon which the case was submitted to the jury. It is clear beyond question that the defendant did not act out of “disinterested malevolence”, the epigrammatic phrase coined by Justice Holmes in American Bank & Trust Company v. Federal Reserve Bank, 256 U.S. 350, 358....... The most that could be said, under plaintiff’s version of the transaction, was that the defendant had decided, in view of the fact that the volume of business from the Downsville area was falling off and that the plaintiff was demanding a higher rate of pay, that it would be best to concentrate the trucking from that area in the hands of a single trucker who would be able to make a living out of the total volume at the current rates and that it accordingly decided to arrange to have Williams take over all the business. Even upon that hypothesis, the decision by the defendant was a decision taken in the ordinary course of business, designed to serve its interests and those of its farmer members. The defendant was dealing with a highly perishable product and it was important that dependable trucking arrangements should be made, which would not be subject to the constant threat of disruption. In shifting the business to Williams, the defendant merely sought to establish a stable arrangement under which it would be assured that the trucking would continue to be done, free from persistent pressure for increased compensation. 02 kutner 4e final 3/1/13 12:39 PM Page 145 Copyright © 2013 Carolina Academic Press, LLC. All rights reserved. 2 · ECONOMIC RELATIONS 145... It is true that economic self-interest does not ordinarily afford a justification for inducing the breach of a contract for a definite term but this rule has no application to the inducing of the termination of a contract which is terminable at will.... [T]he rules with respect to the scope of the defendant’s privilege are wholly different in the two classes of cases. The fact that the contract is terminable at will greatly broadens the scope of the defendant’s privilege. The privilege in such a case is substantially the same as the privilege of inducing third persons not to enter into new business relations with the plaintiff. Under the principles of the free enterprise system, that privilege is a very broad one and it is forfeited only when the defendant’s action, otherwise lawful, is intended solely to injure the plaintiff without any expectation of social or economic advantage. On the other hand, the furthering of one’s business interests does not ordinarily justify the inducing of the breach of a contract for a definite term. Thus, for example, one may not with impunity seek to gain new customers by inducing them to breach their existing contracts with others but, in the free play of competition, one may seek to win for himself the patronage of the customers of others, by inducing them to discontinue their existing business relations, provided that they are terminable at will.... [Reversed. Complaint dismissed.] Notes 1. The prevailing view is that an action may lie for interference with a contract that is terminable at will. See United States Fidelity & Guaranty Co. v. Millonas, 206 Ala. 147, 89 So. 732 (1921); Bochnowski v. Peoples Federal Savings & Loan Association, 571 N.E.2d 282 (Ind. 1991). This is qualified by holdings, as in the principal case, that interference with a contract at will by otherwise lawful conduct is not actionable unless defendant acted solely, or at least predominantly, out of malice. See also Huskie v. Griffin, 75 N.H. 345, 74 A. 595 (1909); Reinforce, Inc. v. Birney, 308 N.Y. 164, 124 N.E.2d 104 (1954). A reading of many recent cases may justify the conclusion that the required malice is not actual ill will or spite, but only an intent to cause harm without justification, or without a legitimate business purpose. See Annot., Liability for Interference with At Will Business Relationship, 5 A.L.R.4th 9 (1981) (noting that claim is often treated as interference with prospective advantage, considered pp. 164–210, infra). 2. No relief will be granted for interference with a totally invalid contract. See Fairbanks, Morse & Co. v. Texas Electric Service Co., 63 F.2d 702 (5th Cir. 1933), cert. denied, 290 U.S. 655 (1933) (contracts creating monopoly); Carruthers v, Flaum, 365 F. Supp. 2d 448 (S.D.N.Y. 2005) (contracts for development of illegal gambling facilities); Thomas v. Ratiner, 462 So. 2d 1157 (Fla. App. 1984) (retainer illegally solicited by attorney employed by hospital); Cappiello, Hofman & Katz v. Boyle, 87 Cal. App. 4th 1064, 105 Cal. Rptr. 2d 147 (2001) (law firm’s contracts with clients illegal because firm was corporation that had failed to register with State Bar). The result may be different if the contract is merely unenforceable. Most authority allows an action for inducing nonperformance of contracts that violate the Statute of Frauds. See Friedman v. Jackson, 266 Cal. App. 2d 517, 72 Cal. Rptr. 129 (1968); Royal Realty Co. v. Levin, 244 Minn. 288, 69 N.W.2d 667 (1955). Cf. United Yacht Brokers, Inc. v. Gillespie, 377 So. 2d 668 (Fla. 1979) (brokerage contract unenforceable against principal without written authorization for transaction). Compare NCH Corp. v. Share Corp., 757 F.2d 1540 (5th Cir. 1985); AMX International, Inc. v. Battelle Energy Alliance, LLC, 744 F. Supp. 2d 1087 (D. Idaho 2010) (no liability for inducing violation of unenforceable employee covenant not to compete). Some decisions permit recovery when the contract is unenforceable due to lack of con- 02 kutner 4e final 3/1/13 12:39 PM Page 146 Copyright © 2013 Carolina Academic Press, LLC. All rights reserved. 146 2 · ECONOMIC RELATIONS sideration, mutuality or certainty. See Allen v. Leybourne, 190 So. 2d 825 (Fla. App. 1966); Barlow v. International Harvester Co., 95 Idaho 881, 522 P.2d 1102 (1974); Aalfo Co. v. Kinney, 105 N.J.L. 345, 144 A. 715 (1929). Arguably, this should be treated as interference with prospective advantage, not interference with contract. See Guard-Life Corp. v. S. Parker Hardware Manufacturing Corp., 50 N.Y.2d 183, 428 N.Y.S.2d 628, 406 N.E.2d 445 (1980). The court in PMC, Inc. v. Saban Entertainment, Inc., 45 Cal. App. 4th 579, 52 Cal. Rptr. 2d 877 (1996), held in broad terms that if the contract was not enforceable, the only action is interference with prospective advantage. (The contract in the case was unenforceable because not in writing.) See also OBG Ltd. v. Allan, A.C. 1 (H.L.), requiring a breach of contract for which the contracting party would be liable. See generally Annot., Liability for Interference with Invalid or Unenforceable Contract, 96 A.L.R.3d 1294 (1980). If a contracting party is under no obligation to perform a contractual undertaking, does it make sense to allow a tort action against the person who persuaded the party not to perform? 3. Not to be overlooked is the question whether there really was a contract at all. This was central to the most celebrated interference with contract case of recent times, Texaco, Inc. v. Pennzoil, Co., 729 S.W.2d 768 (Tex. App. 1987), cert. dismissed, 485 U.S. 994 (1988), cause dismissed, 748 S.W.2d 631 (Tex. App. 1988) (applying New York law, under which existence of contract depended upon whether parties intended to be bound by agreement). Also in issue was whether the defendant (Texaco) had sufficient knowledge of the transaction to know it was a contract. A verdict for ten and a half billion dollars was affirmed except for two of the three billion dollars in exemplary damages. See also ACT, Inc. v. Sylvan Learning Systems, Inc., 296 F.3d 657 (8th Cir. 2002). ————— Kemp v. Division No. 241, Amalgamated Association of Street & Electric Railway Employees of America Supreme Court of Illinois 255 Ill. 213, 99 N.E. 389 (1912) COOKE, J. [with whom Farmer and Vickers, JJ., joined].... [Several employees of the Chicago Railways Company resigned from their union, objecting to use of membership dues for political purposes. Union officials demanded that the company discharge these employees and threatened a strike by union members if they were not discharged. The members voted to refuse to work with non-union employees. The dissidents refused to withdraw their resignations and sought an injunction restraining the union and its officials from procuring their discharge by the company. The Appellate Court ruled in favor of the dissidents.]... “That which it is right and lawful for one man to do cannot furnish the foundation for an action in favor of another. Nor can the absence of commendable motive on the part of the party exercising his rights be the legal substitute or equivalent for the thing amiss, which is one of the necessary elements of a wrong.” [Cooley, Torts, p. 81.]... Every employé has a right to protection in his employment from the wrongful and malicious interference of another resulting in damage to the employé; but, if such interference is but the consequence of the exercise of some legal right by another, it is not wrongful, and cannot, therefore, be made the basis for an action to recover the consequent damages. It is the right of every workman, for any reason which may seem sufficient to him, or for no reason, to quit the service of another, unless bound by contract.... Inci- 02 kutner 4e final 3/1/13 12:39 PM Page 147 Copyright © 2013 Carolina Academic Press, LLC. All rights reserved. 2 · ECONOMIC RELATIONS 147 dent to this constitutional right is the right of every workman to refuse to work with any coemployé who is for any reason objectionable to him, provided his refusal does not violate his contract with his employer; and there is no more foundation for the contention that the employé commits an actionable wrong by informing the employer, before he leaves the service, that he will not work with the objectionable coemployé, and thereby occasioning his discharge, than there would be for the contention that the employé would commit an actionable wrong by quitting the service and afterward stating to the employer his reason therefor, if as a result thereof the employer should choose to discharge the objectionable coemployé.... [H]ad the union employés, as individuals and without any prearranged concert of action, each informed the Railways Company that they would no longer work with appellees because appellees were not members of the union, and had appellees, in consequence thereof, been discharged because the Railways Company chose to retain the services of the union employés, appellees would have had no cause of action against the union employés for thus causing their discharge.... Labor unions have long since been recognized by the courts of this country as a legitimate part of the industrial system of this nation. The ultimate purpose of such organizations is, through combination, to advance the interests of the members by obtaining for them adequate compensation for their labor, and it has been frequently decided by the American courts that the fact that this purpose is sought to be obtained through combination or concerted action of employés does not render the means unlawful.... The purpose of organizing labor unions is to enable those employés who become members to negotiate matters arising between them and their employers through the intermediation of officers and committees of the union and to accomplish their ends through concerted action. If duly authorized by the employés to adjust any controversy arising between them and their employer, the union, its officers, and committees are merely acting as agents of the employés in the matter. If the union employés had the legal right to inform their employer of their refusal to work with appellees, they had the legal right to convey that information to the employer through an agent or agents, and the agent or agents would not commit an actionable wrong thereby nor by reporting back to the union employés the result of the conference with the employer. The demand that appellees be discharged, and the threat that unless the Railways Company complied with the demand the members of the union would call a strike of the employés of the Railways Company, in effect meant no more than the mere statement that the union employés of the Railways Company would no longer work with the nonunion employés, and, if the Railways Company chose to retain in its employ the nonunion men, the union employés would quit the service of the Railways Company.... The contemplated action of the union employés is not the result of the dictation of any officer or officers of the union or of any person not interested in the employment, but is the voluntary action of the union employés of the Railways Company.... While it cannot be successfully contended that every strike is lawful, it is generally conceded by our courts that workmen may quit in a body, or strike, in order to maintain wages, secure advancement in wages, procure shorter hours of employment, or attain any other legitimate object. An agreement by a combination of individuals to strike or quit work for the purpose of advancing their own interests or the interests of the union of which they are members, and not having for its primary object the purpose of injuring others in their business or employment, is lawful. As to whether the object which this bill discloses was sought to be attained by the members of the union was a lawful one or a valid justification of the threat to strike, the authorities in this country are clearly in conflict.... 02 kutner 4e final 3/1/13 12:39 PM Page 148 Copyright © 2013 Carolina Academic Press, LLC. All rights reserved. 148 2 · ECONOMIC RELATIONS It does not follow from a consideration of all the material allegations of the bill that the primary object of the union employés, or of the union officers in carrying out the wishes of the members, was to injure appellees. Neither can it be said that any actual malice has been disclosed toward the appellees or an intent to commit a wrongful or harmful act against them. No threats are made, and no violence is threatened.... It is insisted that a strike is lawful only in a case of direct competition, and, as it cannot be said that the union employés are in any sense competing with appellees, their acts cannot be justified. It is true... that the proposed strike was not to be called for the direct purpose of securing better wages or shorter hours or to prevent a reduction of wages, any one of which would have been a proper object. The motive was more remote than that, but it was kindred to it. The purpose was to strengthen and preserve the organization itself. Without organization, the workmen would be utterly unable to make a successful effort to maintain or increase their wages or to enforce such demands as have been held to be proper.... If it is proper for workmen to organize themselves into such combinations as labor unions, it must necessarily follow that it is proper for them to adopt any proper means to preserve that organization. If the securing of the closed shop is deemed by the members of a labor union of the utmost importance and necessary for the preservation of t