Herman v. Prudence Mut. Cas. Co.

• Decision Date: 29 January 1969
• Docket Number: No. 41343,41343
• Parties: Alvin P. HERMAN et al., Appellees, v. PRUDENCE MUTUAL CASUALTY COMPANY et al., Appellants.
• Court: Illinois Supreme Court

Page 809

244 N.E.2d 809

41 Ill.2d 468

Alvin P. HERMAN et al., Appellees, v. PRUDENCE MUTUAL CASUALTY COMPANY et al., Appellants.

No. 41343.

Supreme Court of Illinois.

Jan. 29, 1969.

Carey, Filter, Murray & White, Chicago, for appellant Prudence Mutual Cas. Co. (James C. Murray and Robert P. Freeman, Chicago, of counsel).

Schaller & Reilly, Chicago, for appellant George F. Barrett (James C. Murray and Robert P. Freeman, Chicago, of counsel).

Ronald L. Cohen, Chicago (Terence F. MacCarthy, Chicago, of counsel), for appellees.

UNDERWOOD, Justice.

The circuit court of Cook County dismissed on the pleadings a complaint by several lawyers and their clients seeking an injunction against and damages from an insurance company and its agents for alleged malicious interference with contractual rights. The plaintiffs appealed directly here, and we transferred (38 Ill.2d 98, 230 N.E.2d 231) to the First District Appellate Court because of the absence of a substantial constitutional question. That court reversed the trial court, holding the complaint sufficient to state a cause of action. (92 Ill.App.2d 222, 235 N.E.2d 346.) We granted the defendants' petition for leave to appeal.

The action was instituted by attorneys Alvin P. Herman and Theodore Tannebaum (hereinafter 'the attorneys'), and Emanuel Acino, Janice Lindsey, Madeline Amato and Tony Paras (hereinafter 'the class-plaintiffs'), personal injury clients of the attorneys, on behalf of themselves and 87 other allegedly similarly situated clients of the attorneys, and Alex Cason, another personal injury client of the attorneys. The defendants are Prudence Mutual Casualty Company, George F. Barrett, an attorney who is a director of Prudence and defends suits against it, Urban Service Bureau, Inc., which is employed by Prudence and other insurance companies to adjust and settle claims, and William Warren, an employee of Urban. In the first court of a three-court complaint, the attorneys allege that they have entered into employment retainer contracts with 92 clients who have personal injury or property damage claims against assureds of Prudence; that, subsequent to creation of these contracts, the attorneys sent or caused to be sent to each of the assureds notices of attorneys' liens which were forwarded by the assureds to Prudence; that they have expended time and money in preparation of the claims, have instituted lawsuits in 43 of them, and have attempted to negotiate settlements of the claims with Prudence and Barrett; that Prudence and Barrett, together with Urban and Warren, maliciously, unethically, and illegally conspired to defraud the clients by persuading them to prematurely release their claims without advice of counsel or opportunity of trial that, in furtherance of the conspiracy, defendants have: '(a) Maliciously and fraudulently attempted to induce, are presently inducing or have induced or otherwise purposely caused HERMAN'S clients to discontinue their business relationships with HERMAN: (b) * * * caused HERMAN'S clients to breach or terminate their respective contracts * * *; (c) Maliciously and fraudulently interfered with HERMAN'S occupation and business expectancies and HERMAN'S clients' claim expectancies; (d) Participated in the unauthorized practice of law * * *; (e) Violated the Canons of Professional Ethics of the Illinois State Bar Association,' particularly Canon 9 which prohibits an attorney from communicating directly with or advising a party represented by counsel upon a subject in controversy. In count II, the class-plaintiffs reassert all of the allegations of the first count. In count III, Cason reasserts all the allegations of the first count, and, in addition, claims that Warren maliciously, fraudulently and falsely advised him that Warren's only purpose was to reimburse him for sums of money ($100) not otherwise covered by Cason's insurer for the repair of his automobile; that Warren advised him not to notify his attorney and that he (Warren) would explain, and that Warren did fraudulently explain, the legal relationship and nature of the releases, drafts and documents shown to him; that Warren filled out and completed such releases and drafts and fraudulently obtained from him a release of all claims against Prudence's assured for $100; that he relied on defendant's representations which were false and were wilfully and maliciously made with intent to induce him to act thereon and to deceive and defraud him. Alleging that they have no adequate remedy at law, all plaintiffs asked for a temporary and permanent injunction prohibiting defendants from communicating further with the class-plaintiffs in any way, for actual and punitive damages, and for certain other relief. Copies of two of the retainer agreements were attached to the complaint; included in them is a clause whereby the clients agreed to pay the attorneys a reasonable fee for services and advice rendered should the clients withdraw their claims or cease asserting them.

Plaintiffs do not now contend that a cause of action accrued to them from the alleged violations of the Canons of Professional Ethics. The plaintiff attorneys do, however, vigorously urge the sufficiency of count I to establish a cause of action against defendants for malicious and fraudulent interference in the business relationships between plaintiff attorneys and their clients. The trial court held all counts of the complaint insufficient, and the appellate court reversed, holding all counts sufficient. We believe the trial court was correct as to the first and second counts, but that the third count adequately states a cause of action in behalf of plaintiff Cason based upon the factual allegations relating to the unauthorized practice of law.

Part of the difficulty in this case seems to stem from what appears to be a belief that all parties plaintiff are entitled to the benefit of all of the allegations of the entire complaint regardless of the fact that each count of the complaint has different plaintiffs and different allegations. Such is not the law. Each count of a complaint is ordinarily a separate statement of claim and its sufficiency is to be determined by its content, including material appearing elsewhere but specifically incorporated therein by reference. Ross v. Chicago & Alton Railroad Co., 225 Ill.App. 633; Kovar v. Bremer, 281 Ill.App. 505, 509; 41 Am.Jur. sec. 108; 71 C.J.S. Pleading § 90, p. 225.

The inadequacy of counts I and II lies not in the theory of the action but in the absence of factual allegations supporting that theory. Third party inducement of breaches of contract or unjustifiable interference by third parties in business relationships between attorneys and clients have been held actionable in numerous cases. (See Employer's Liability Assur. Corp. v. Freeman (10th cir.), 229 F.2d 547; State Farm Fire Ins. Co. v. Gregory (4th cir.), 184 F.2d 447; Hansen v. Barrett (D. Minn.), 183 F.Supp. 831; Bennett v. Sinclair Nav. Co. (E.D. Pa.), 33 F.Supp. 14; Lurie v. New Amsterdam Casualty Co., 270 N.Y. 379, 1 N.E.2d 472; Gordon v. Mankoff (City Ct. of N.Y.) 146 Misc. 258, 261 N.Y.S. 888; Herron v. State Farm Mutual Ins. Co., 56 Cal.2d 202, 14 Cal.Rptr. 294, 363 P.2d 310; Fowler v. Nationwide Ins. Co., 256 N.C. 555, 124 S.E.2d 520; Goldman v. Home Mutual Ins. Co., 22 Wis.2d 334, 126 N.W.2d 1; Keels v. Powell, 207 S.C. 97, 34 S.E.2d 482; Klauder v. Cregar, 327 Pa. 1, 192 A. 667; Bauer v. Biel, 132 Ind.App. 224, 177 N.E.2d 260; Studdard v. Evans, 108 Ga.App. 819, 135 S.E.2d 60.) And the theory of the action as announced in Lumley v. Gye, 2 Ell. & Bl. 216, has been repeatedly reaffirmed in this State. (Doremus v. Hennessy, 176 Ill. 608, 52 N.E. 924, 54 N.E. 524, 43 L.R.A. 797; London Guarantee and Accident Co. v. Horn, 206 Ill. 493, 69 N.E. 526; Carpenters' Union v. Citizens Committee to Enforce Landis Award, 333 Ill. 225, 164 N.E. 393, 63 A.L.R. 157.) It is stated in section 766 of the Restatement of the Law of Torts as follows: 'Except as stated in Section 698 (which is not here relevant), one who, without a privilege to do so, induces or otherwise purposely causes a third person not to

(a) perform a contract with another, or

(b) enter into or continue a business relation with another

is liable to the other for the harm caused thereby.'

Part (b) of the ensuing comments would lend support to plaintiffs' argument that there is a general duty not to purposely interfere with another's contractual expectancies from third persons. It also, however, is there indicated that a privilege to interfere, even in contractual relationships, may exist dependent upon the methods used (b), interest of the interer (c), purpose (d), ill will (m), and other factors more specifically dealt with in section 767 and ensuing sections. The controversy here as to the propriety of an insurer instituting negotiations directly with claimants known by the insurer to be represented by counsel would necessitate consideration of the extent of an insurer's privilege, if any, in this respect, were the complaint sufficient to state a cause of action apart from the question of privilege. (E.g., Herron v. State Farm Mutual Insurance Company, 56 Cal.2d 202, 14 Cal.Rptr. 294, 363 P.2d 310; but see Krause v. Hartford Accident & Indemnity Co., 331 Mich. 19, 49 N.W.2d 41.) We believe, however, that it is not.

In their brief, plaintiffs assert that 'The gravamen of the complaint * * * is best summarized * * * in Section 766 of the Restatement' and that 'Particularly descriptive of the claim of the complaint is the 'second situation' described in Comment (c) to section 766: 'The second situation is that in which B and C are already in a business relationship which is terminable at B's will and A induces or otherwise purposely causes B to Terminate the relationship * * *'.' (Our emphasis.) While we have not heretofore had occasion to consider the propriety of an action for malicious interference with...