Kademenos v. Equitable Life Assur. Soc. of U.S.

• Citation: 513 F.2d 1073
• Decision Date: 09 September 1974
• Docket Number: No. 74-1128,74-1128
• Parties: Sam KADEMENOS v. EQUITABLE LIFE ASSURANCE SOCIETY OF the UNITED STATES, a corporation, Appellant. . Submitted on Briefs Under Third Circuit Rule 12(6)
• Court: United States Courts of Appeals. United States Court of Appeals (3rd Circuit)

Page 1073

513 F.2d 1073

Sam KADEMENOS v. EQUITABLE LIFE ASSURANCE SOCIETY OF the UNITED STATES, a corporation, Appellant.

No. 74-1128

United States Court of Appeals Third Circuit.

Submitted on Briefs Under Third Circuit Rule 12(6) Sept. 9, 1974.

Argued Jan. 8, 1975.

Decided April 9, 1975.

Thomas Lewis Jones, Richard C. Witt, Jones, Gregg, Creehan & Gerace, Pittsburgh, Pa., for appellant.

Anthony V. DeCello, Joseph D. Talarico, DeCello, Bua & Manifesto, Pittsburgh, Pa., for appellee.

Submitted Under Rule 12(6) Sept. 9, 1974.

Before KALODNER, ALDISERT and ROSENN, Circuit Judges.

OPINION OF THE COURT

ROSENN, Circuit Judge.

The conduct of competitors in the insurance marketplace claims our attention on this appeal in which we are asked to determine whether the acts of the defendant come within the privilege to interfere with the contractual relations of a competitor. Plaintiff, an insurance agent, seeks to recover the commission he would have received on the issuance by Jefferson Standard Life Insurance Company (Jefferson Standard) of a one million dollar policy which, as a result of the alleged interference of the defendant Equitable Life Assurance Society (Equitable), was cancelled by the insured. This diversity case was tried to a jury which returned a verdict for plaintiff in the amount of $27,000 upon which judgment was entered in the United States District Court for the Western District of Pennsylvania. The district court denied Equitable's motions for a directed verdict and for judgment notwithstanding the verdict. Equitable appealed; ¹ we reverse.

Since plaintiff has the benefit of a jury verdict, in reviewing the district court's denial of Equitable's motion for judgment notwithstanding the verdict, we must consider the evidence in the light most favorable to plaintiff, drawing all reasonable inferences in favor of the plaintiff and against the defendant. Andrews v. Dravo Corp., 406 F.2d 785, 789 (3d Cir. 1969); Delaware & H. R. R. v. Bonzik, 105 F.2d 341, 344 (3d Cir. 1939); Baltimore & O. R. R. v. Muldoon, 102 F.2d 151, 152 (3d Cir. 1939).

Until shortly before the alleged interference, plaintiff was an agent of Equitable under a written contract in which he "agree(d) not to submit to any other company proposals for any forms of policies or annuity contracts, of a class of business issued by (Equitable), unless authorized by (Equitable)." In return, Equitable provided plaintiff with office space, secretarial services, telephone, stationery, and technical advice and assistance.

In May 1970 plaintiff solicited Nick Manganas for the purchase of an Equitable life insurance policy. Thereafter, Equitable paid for two physical examinations of Manganas, performed on May 29 and July 9, 1970. The expense of a third examination, conducted on August 3, 1970, was borne at least in part by Equitable. During May and June 1970, Jay Harrison, a specialist employed by Equitable, was called in to assist plaintiff by formulating a plan of insurance tailored to achieve specific objectives of Manganas. ² On July 17, 1970, Manganas signed a formal application for insurance with Equitable. Unknown to Equitable, plaintiff had on the day before met with Gerald H. Bertelotti, Jefferson Standard's local manager, and secured from him a blank application for insurance with that company which plaintiff had Manganas complete on August 1, 1970.

On August 20, 1970, plaintiff executed a broker's contract with Jefferson Standard and ordered insurance contracts issued by both Jefferson Standard and Equitable. On August 28, 1970, Equitable made available to plaintiff a policy issued to Manganas subject to payment of the first premium. Plaintiff resigned as agent for Equitable on August 31, 1970, effective September 1, 1970. On September 1, 1970, plaintiff signed an agency contract with Jefferson Standard which provided him with significantly more emoluments than his contract with Equitable. Subsequently, on September 5, 1970, Jefferson Standard delivered its policy to Manganas, at which time Manganas tendered a check for one-half the first premium.

When Harrison discovered that a Jefferson Standard policy had been delivered and learned for the first time that Jefferson Standard was competing with Equitable, he promptly called Manganas' accountant for verification and was referred to Manganas himself. Harrison's telephone conversation with Manganas constitutes the alleged interference on which this action is based.

The jury permissibly could have found that Harrison, in explaining the differences between the Equitable and Jefferson Standard policies, told Manganas that the Jefferson Standard policy would "hurt (him) more than help (him)." The jury further could have found that Harrison volunteered the advice that Manganas could stop payment on his check to Jefferson Standard until the merits of the two policies could be reevaluated. Manganas thereupon consulted with his accountant and his attorney, and then stopped payment on the check. Several days later, after meeting with representatives of Equitable and Jefferson Standard, Manganas concluded that both insurance companies were lying to him and decided not to purchase insurance from either. Because a sale was not consummated, plaintiff did not receive a commission.

Both parties assume, as did the district court, that Pennsylvania law governs this case. The Jefferson Standard policy, with which Equitable allegedly interfered, was delivered in Pennsylvania. Moreover, although Harrison apparently placed his call to Manganas from Virginia, Manganas received the call and cancelled the Jefferson Standard policy in Pennsylvania. We therefore believe that Pennsylvania has the greatest interest in the resolution of the issues presented in this case and that its law is applicable. Klaxon Co. v. Stentor Elec. Mfg. Co., 313 U.S. 487, 496-97, 61 S.Ct. 1020, 85 L.Ed. 1477 (1941); Neville Chem. Co. v. Union Carbide Corp.,422 F.2d 1205, 1211 (3d Cir. 1970); Griffith v. United Air Lines, Inc.,416 Pa. 1, 10-25, 203 A.2d 796, 800-07 (1964).

Despite contrary inferences which might be drawn from the meager and vague allegations in the complaint, the theory of plaintiff's action is essentially that Equitable interfered with plaintiff's contractual relations with Jefferson Standard. The corollary alleged is that Equitable's interference with the insurance contract between Jefferson Standard and Manganas ipso facto interfered with plaintiff's contract with Jefferson Standard for a sales commission. The theory of the defense was twofold: first, that plaintiff's negotiations for the sale of the Jefferson Standard policy to Manganas were in direct violation of his written agency contract with Equitable and in dereliction of his duties as an agent; second, that the telephone conversation of Equitable's employee, Harrison, was privileged and did not constitute interference with Jefferson Standard's insurance contract with Manganas.

Pennsylvania closely follows the Restatement in defining the tort of interfering with contractual relations. Lanard & Axilbund, Inc. v. Binswanger, 212 Pa.Super. 350, 356, 242 A.2d 912, 914 (1968). The Restatement provides that

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.

Restatement of Torts § 766 (1939). ³ In Birl v. Philadelphia Electric Co., the Pennsylvania Supreme Court expressly adopted the Restatement definition and enumerated its elements. 402 Pa. 297, 301, 167 A.2d 472, 474 (1960).

(T)he actor must act (1) for the purpose of causing this specific type of harm to the plaintiff, (2) such act must be unprivileged, and (3) the harm must actually result.

Id. The question on this appeal is whether the plaintiff adduced sufficient evidence to support the jury's finding of an absence of privilege. ⁴

The Pennsylvania Supreme Court recently dealt with the issue of privilege in Glenn v. Point Park College, 441 Pa. 474, 481-82, 272 A.2d 895, 899 (1971). In the course of its opinion, the court cited with approval section 768 of the Restatement which defines the privilege of a competitor.

§ 768. Privilege of Competitor.

(1) One is privileged purposely to cause a third person not to enter into or continue a business relation with a competitor of the actor if

(a) the relation concerns a matter involved in the competition between the actor and the competitor, and

(b) the actor does not employ improper means, ⁵ and

(c) the actor does not intend thereby to create or continue an illegal restraint of competition, and

(d) the actor's purpose is at least in part to advance his interest in his competition with the other.

(2) The fact that one is a competitor of another for the business of a third person does not create a privilege to cause the third person to commit a breach of contract with the other even under the conditions stated in Subsection (1).

Restatement of Torts § 768 (1939).

In determining the scope of a competitor's privilege, the law seeks to foster competition while simultaneously protecting existing contract obligations. In this case, we also are confronted by another fundamental policy of the law which requires an agent subject to a duty to his principal "to act solely for the benefit of the principal in all matters connected with the agency." Restatement (Second) of Agency § 387 (1957). He may, therefore, as comment (b) to section 387 observes, "take no unfair advantage of his position in the use of information or things acquired by him because of his position as agent or because of the opportunities which his position affords." Pennsylvania has adopted this view.

An agent owes a duty of loyalty to his principal, it is his duty in all dealings affecting the subject matter of his agency, to act with the utmost good faith and loyalty for the furtherance and...