9 to 5 Fashions, Inc. v. Spurney

Citation538 So.2d 228
Decision Date30 January 1989
Docket NumberNos. 88-C-0902,88-C-0904,s. 88-C-0902
PartiesFASHIONS, INC. v. Petr L. SPURNEY, et al.
CourtSupreme Court of Louisiana

Eugene R. Preaus, Robert B. McNeal, Phelps, Dunbar, Marks, Claverie & Sims, New Orleans, Ernest L. O'Bannon, John E. McAuliffe, Bienvenu, Foster, Ryan & O'Bannon, New Orleans, for Petr L. Spurney, et al.

Peter J. Castano, New Orleans, Wendell H. Gauthier, Metairie, for 9 to 5 Fashions, Inc.

DENNIS, Justice.

In this case we are called upon to decide whether an officer of a corporation owes any duty to a person having a contract with the corporation to refrain from unjustified, intentional interference with the contractual relationship. After a bench trial, the district court found that a corporate officer negligently and intentionally interfered with the plaintiff's performance of its contract with the corporation to supply uniforms and awarded damages against the officer. On appeal, the court of appeal reduced the damage award but otherwise affirmed. We reverse. We recognize a duty on the part of a corporate officer to refrain from the intentional interference with contractual relations between his corporation and other persons, unless there is a reasonable justification for his conduct. However, in the present case the corporate officer's actions were justified and therefore privileged because they were committed in the scope of his corporate authority, were not intended to interfere with the performance of the contract and were not knowingly contrary to the corporation's best interest.

Facts

Louisiana World Exposition, Inc., (LWE), a non-profit corporation organized to plan and conduct the 1984 Louisiana World's Fair, contracted with 9 to 5 Fashions, Inc., to supply custom made uniforms for the Fair employees. After the Fair was over, 9 to 5 was unable to collect what it contends was the full amount owed under the contract because LWE had taken bankruptcy. Consequently, 9 to 5 filed suit against Petr Spurney, chief executive officer of LWE, and his insurer, alleging that Spurney damaged 9 to 5 by numerous acts and omissions of intentional and negligent interference that caused its performance of the uniform supply contract to be more burdensome and costly.

In 1983, prior to the Fair, LWE interviewed several prospective uniform suppliers and narrowed the field to two firms, 9 to 5 and Creative Images/Marlin Manufacturing Co. (Marlin). The task of studying the two firms' qualifications and making a recommendation to LWE's Management Committee for a final selection was referred to the Concessions Committee. In September, 1983, Spurney, as chief executive officer, advised the Concessions Committee to recommend Marlin. 9 to 5 filed suit against Marlin and an LWE employee alleging restraint of trade. Spurney induced 9 to 5 to dismiss the suit by agreeing to recommend 9 to 5 for the uniform contract. Some three weeks after this agreement, on November 16, 1983, Spurney recommended to the Management Committee that 9 to 5 be awarded the contract. On the same day, the Management Committee approved 9 to 5 as uniform supplier and referred the matter to the LWE legal department for final negotiations and formal contract preparation. During the interim between Spurney's agreement and his recommendation to the Management Committee, Spurney directed LWE employees to communicate with other uniform supply firms to determine if any could provide the uniforms for the Fair, in the event no formal contract with 9 to 5 was completed. Beginning in December, 1983, 9 to 5 ordered fabric as best it could with the advice and approval of LWE employees who were not specifically assigned to perform this function. Spurney did not appoint an LWE employee to be exclusively in charge of coordinating the design and supply of the uniforms until February 7, 1984. Spurney appointed an LWE employee who had experience with costuming and wardrobing, but no experience with uniform supply coordination, instead of another employee who had performed this function for a previous world's fair. The uniform contract was not signed until May 8, 1984, just a few days prior to the opening of the fair on May 12, 1984. See the court of appeal's opinion for a more complete statement of the facts, including a description of LWE's internal organization and operations. 9 to 5 Fashions, Inc. v. Spurney, 520 So.2d 1276 (La.App. 5th Cir.1988).

Trial and Appeals Courts

The trial court found that Spurney's delay in appointing a uniform coordinator hampered 9 to 5's ability to anticipate uniform needs and resulted in its ordering more material than was ultimately required. This resulted in a loss of profits on the uniform contract by 9 to 5. The trial court concluded that Spurney was personally liable for this loss, which it fixed at $101,438. The court's rationale for assigning liability was unclear. Its opinion seems to assert that Spurney contractually agreed to be personally responsible for such losses, that he negligently caused the damage, and that he should be responsible because he was guilty of intentional misconduct and misrepresentation causing the harm.

The court of appeal reduced the damage award to $45,308 but otherwise affirmed the trial court judgment. The court found that Spurney breached his duty of "due care" by his delay in appointing a uniform coordinator, although he knew there was a need for such a coordinator three months earlier. Because of the lack of a person with exclusive responsibility, the court concluded, lack of communication and understanding resulted in delays in designing and manufacturing as well as overordering of fabrics and notions. Further, the court found that the trial court's finding that "Spurney was carrying out a personal vendetta against 9 to 5" was not clearly wrong. As in the trial court's reasons, the court of appeal's decision does not seem to be based clearly on any one legal rationale but appears to be loosely associated with several legal theories. 9 to 5 Fashions, Inc. v. Spurney, 520 So.2d 1276 (La.App. 5th Cir.1988).

Plaintiff's Arguments

In this court, plaintiff does not argue that Spurney is liable to it in contract or that he was guilty of fraud or misrepresentation causing damage. Furthermore, the evidence does not reasonably support the finding of facts essential to 9 to 5's recovery on any of these grounds.

9 to 5's principal contention is that Spurney's acts causing 9 to 5 to experience delay and difficulty in the performance of its contract with LWE resulted in damage to 9 to 5 for which Spurney is liable. 9 to 5 seems to argue that Spurney acted intentionally to delay and hamper its performance. On the other hand, 9 to 5 also appears to argue that Spurney is legally responsible even if he was only negligent in causing damage. In effect, without labeling the delict, 9 to 5 urges this court to recognize an action that it has refused to allow since 1902, viz., an action for tortious interference with a contractual relationship. We must reexamine the basic precepts of our delictual law in the light of modern conditions to determine whether reparation is due under either an intentional or negligent interference with contract theory.

Legal Precepts

It is the basic policy of our law that every act whatever of man that causes damage to another obliges him by whose fault it happened to repair it. La.Civ.Code art. 2315. The framers conceived of fault as a breach of a preexisting obligation for which the law orders reparation, when it causes damage to another, and they left it to the courts to determine in each case the existence of an anterior obligation which would make an act constitute fault. 2 M. Planiol, Treatise on the Civil Law, Part 1, Secs. 863-865 (1959); Pitre v. Opelousas General Hosp., 530 So.2d 1151 (La.1988).

Referring to these basic principles, we conclude that, in the light of modern empirical considerations and the objectives of delictual law, an officer of a corporation owes an obligation to a third person having a contractual relationship with the corporation to refrain from acts intentionally causing the company to breach the contract or to make performance more burdensome, difficult or impossible or of less value to the one entitled to performance, unless the officer has reasonable justification for his conduct. The officer's action is justified, and he is entitled to a privilege of immunity, if he acted within the scope of his corporate authority and in the reasonable belief that his action was for the benefit of the corporation.

Thus, an officer is privileged to induce the corporation to violate a contractual relation, or make its performance more burdensome, provided that the officer does not exceed the scope of his authority or knowingly commit acts that are adverse to the interests of his corporation. Where officers knowingly and intentionally act against the best interest of the corporation or outside the scope of their authority, they can be held liable by the party whose contract right has been damaged.

These precepts are derived from the contemporary doctrine of interference with contractual relations existing in other jurisdictions. See, e.g., Chanay v. Chittenden, 115 Ariz. 32, 563 P.2d 287 (1977); Wampler v. Palmerton, 250 Or. 65, 439 P.2d 601 (1968); Seven D. Enterprises Ltd. v. Fonzi, 438 F.Supp. 161 (E.D.Mich.1977). See generally, 3 W. Fletcher, Cyclopedia of the Law of Private Corporations Sec. 1001(1986); W. Prosser and P. Keeton, The Law of Torts Sec. 129 (5th ed. 1984); 2 Harper, James & Gray, The Law of Torts, Sec. 6.5 et seq. (1986). See Perlman, Interference with Contract and Other Economic Expectancies: A Clash of Tort and Contract Doctrine, 49 U.Chi.L.Rev. 61, 119 (1982); Avins Liability for Inducing a Corporation to Breach its Contract, 43 Cornell L.Q. 55 (1957); Carpenter, Interference with Contract Relations, 41 Harv.L.Rev. 728 (1927-28); Note, 89 Pa.L.Rev. 250 (1940). See also, Restatement of Torts,...

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