Chapter 37: Intentional Interference with Contractual Relationships
The Case: Givens v. Mullikin ex rel McElwaney , 75 S.W.3d 383 (Tenn. 2002).
The Basic Facts: Plaintiff, an automobile accident victim, sued defendant driver and its insured for its conduct in the underlying litigation. Included in the potential causes of action was an inducement to breach contract claim.
The Bottom Line :
- "Tennessee recognizes both a statutory and common law action for inducement to breach a contract, see Tenn. Code Ann. § 47‑50‑109 (2001); Polk & Sullivan, Inc. v. United Cities Gas Co., 783 S.W.2d 538, 543 (Tenn. 1989), and both forms of the action protect 'contracts implied in fact, as well as formal, expressed contracts,' Mefford v. City of Dupontonia, [354 S.W.2d 823, 826 (Tenn. Ct. App. 1961)]. Importantly, the elements for both forms of the action are identical, except that a plaintiff asserting a common law action may recover punitive damages, instead of the treble damages mandated by the statute. See Buddy Lee Attractions, Inc. v. William Morris Agency, Inc., 13 S.W.3d 343, 360-61 (Tenn. Ct. App. 1999). In order to recover on a theory of inducement to breach a contract, a plaintiff must allege and prove seven elements: (1) that a legal contract existed; (2) that the defendant was aware of the contract; (3) that the defendant intended to induce a breach of that contract; (4) that the defendant acted with malice; (5) that a breach of the contract occurred; (6) that the breach was a proximate result of the defendant's conduct; and (7) that the breach injured the plaintiff. See Quality Auto Parts Co. v. Bluff City Buick Co., 876 S.W.2d 818, 822 (Tenn. 1994); Baker v. Hooper, 50 S.W.3d 463, 468 (Tenn. Ct. App. 2001)." 75 S.W.3d at 405.
Other Sources of Note : Cambio Health Solutions, LLC v. Reardon, 213 S.W.3d 785, 789 (Tenn. 2006) (parent corporation may induce breach of contract between non-wholly owned subsidiary and another company); Waste Conversion Systems, Inc. v. Greenstone Industries, Inc. 33 S.W.3d 779, 782 (Tenn. 2000) (parent corporation may not induce breach of contract between wholly owned subsidiary and another company); Ladd v. Roane Hosiery, Inc. 556 S.W.2d 758, 760 (Tenn. 1977) (parties to a contract cannot be held liable for inducing breach of the contract); Buddy Lee Attractions, Inc. v. William Morris Agency, Inc., 13 S.W.3d 343 (Tenn. Ct. App. 1999) (extensive discussion of common law and statutory causes of action, election of remedies, and other issues, and includes a concurring and dissenting opinion by Judge (now Justice) William C. Koch, Jr.); Myers v. Pickering Firm,Inc., 959 S.W.2d 152 (Tenn. Ct. App. 1997) (discusses circumstances under which inducement to breach contract may be privileged).
Recent Cases: Columbus Medical Services, LLC v. Thomas , No. W2008-00345-COA-R3-CV, 2009 WL 2462428 (Tenn. Ct. App. Aug. 13, 2009) (reversing judgment against defendant staffing agency in tortious inducement to breach covenants not to compete in employment agreement finding covenants not enforceable); Sykes v. Chattanooga Housing Authority, No. E2008-00525-COA-R3-CV, 2009 WL 2365705 (Tenn. Ct. App. July 31, 2009) (upholding summary judgment on interference with at-will employment contract); Jones v. Lemoyne-Owen College, No. W2008-00141-COA-R3-CV, 2009 WL 1941515 (Tenn. Ct. App. Jul. 8, 2009) (upholding summary judgment on intentional interference with contract claim finding no underlying employment contract and further finding that plaintiff failed to argue that defendant interfered with his at-will employment); Sanford v. Waugh, No. M2007-02528-COA-R3-CV, 2009 WL 1910957 (Tenn. Ct. App. June 30, 2009) (holding plaintiff had a cognizable cause of action for interference with contract); Fitzgerald v. Abbott, No. M2008-00920-COA-R3-CV, 2009 WL 304421 (Tenn. Ct. App. Feb. 5, 2009) (upholding summary judgment for defendant on intentional interference with employment claim finding district manager of defendant company did not cause plaintiff to be terminated).§37.2 Parent Inducing Wholly-Owned Subsidiary
The Case: Waste Conversion Systems v. Greenstone Industries , Inc., 33 S.W.3d 779 (Tenn. 2000).
The Basic Facts: Plaintiff, the seller of waste paper, brought a federal claim against a buyer's parent corporation asserting the parent corporation willfully and maliciously induced the subsidiary to breach a contract between Plaintiff and the subsidiary.
The Bottom Line:
- "(1) Can a parent corporation be held liable under Tenn. Code Ann. § 47‑50‑109 or under Tennessee law for inducing a subsidiary to breach a contract with another party?
(2) Can a parent corporation be held liable for inducing its subsidiary to breach a contract when the parent was acting on behalf of the subsidiary or acting to further the subsidiary's interests? If so, which party bears the burden of pleading and proving whether the parent was acting on behalf of, or to further the interests of, the subsidiary?
(3) For a parent corporation to be held liable for inducing its subsidiary to breach a contract, must the parent induce the breach by wrongful means? If so, what constitutes wrongful means, and which party has the burden of pleading and proving existence of wrongful means?" 33 S.W.3d at 781.
- "Based on the certified questions posed to this Court, we hold that a parent corporation is privileged to interfere in the contractual relations of a wholly-owned subsidiary and that it is immune from liability for inducing to breach a contract with another party. This privilege, however, can be lost either by acting contrary to such subsidiary's economic interests or by using wrongful means. For this purpose, the definition of wrongful means includes fraud, misrepresentation, threats, violence, defamation, trespass, restraint of trade, intimidation, molestation, or any other wrongful act recognized by statute or common law. Once it is established that the defendant corporation owns 100 percent of the stock of the subsidiary in question, the plaintiff bears the burden of proof to demonstrate that the defendant has lost its privilege by acting contrary to its wholly-owned subsidiary's economic interests or by employing wrongful means in inducing its wholly-owned subsidiary to breach a contract." Id. at 784.
Other Sources of Note: Freeman Management Corp. v. Shurgard Storage Centers, LLC , 461 F.Supp.2d 629, 638 (M.D. Tenn. 2006) (holding that a parent company did not demonstrate a sufficient unity of interest under Waste Conversion to warrant the parent-subsidiary privilege); Cambio Health Solutions, LLC v. Reardon, 213 S.W.3d 785, 792 (Tenn. 2006) (declining to extend Waste Conversion and holding that "the privilege of a parent corporation to interfere with the contractual relations of a subsidiary corporation does not apply when the parent owns less than 100% of its subsidiary.").