Kand Medical, Inc. v. Freund Medical Products, Inc.

• Decision Date: 17 June 1992
• Docket Number: No. 91-3700,91-3700
• Citation: 963 F.2d 125
• Parties: KAND MEDICAL, INC., Plaintiff-Appellant, v. FREUND MEDICAL PRODUCTS, INC., et al., Defendants, Mansfield Scientific, Inc., Defendant-Appellee.
• Court: U.S. Court of Appeals — Sixth Circuit

Page 125

963 F.2d 125

KAND MEDICAL, INC., Plaintiff-Appellant, v. FREUND MEDICAL PRODUCTS, INC., et al., Defendants Mansfield Scientific, Inc., Defendant-Appellee.

No. 91-3700.

United States Court of Appeals Sixth Circuit.

Argued Feb. 14, 1992.

Decided April 29, 1992.

Rehearing and Rehearing En Banc

Denied June 17, 1992.

David R. Kelleher (argued and briefed), Baker & Hostetler, Columbus, Ohio, for plaintiff-appellant.

Armistead W. Gilliam, Jr., Ann Wightman (argued and briefed), and Mary L. Wiseman, Faruki, Gilliam & Ireland, Dayton, Ohio, for defendant-appellee.

Before: KEITH and MARTIN, Circuit Judges; and CELEBREZZE, Senior Circuit Judge.

BOYCE F. MARTIN, Jr., Circuit Judge.

Kand Medical, Inc., appeals the district court's dismissal of its claims against Mansfield Scientific, Inc., for intentional inducement of contractual breach.

Kand entered into a contract with Freund Medical Products, Inc., on January 5, 1987. The contract made Kand the exclusive distributor of Freund medical products in California and Arizona. The Freund products distributed by Kand included medical clamps, pads, and specially designed disposable syringes used in heart catheterization procedures. In August, Freund exhibited a product called the "Inflation Ease" at a trade show attended by Mansfield co-founder, John Abele. This device would be used to monitor the pressure of balloons used in heart angioplasty procedures. Abele was impressed by Freund's device and instructed Mansfield's president to explore the possibility of a business relationship with Freund. In September, a Mansfield representative met with Freund to discuss a potential distribution agreement between the two companies. Mansfield emphasized that it would only consider an exclusive, nationwide distributorship for Freund products. Mansfield and Freund reached a preliminary agreement that Mansfield would pay Freund $300,000 for such an arrangement.

During negotiations, Mansfield inquired if Freund had any current contracts with other dealers that would hinder Freund in negotiating an exclusive dealership contract with Mansfield. Freund responded that its current dealer-contracts were exclusive but "exitable." Freund indicated that it was displeased with the productivity of its current distributors and was considering terminating the current contracts. Freund, however, never specifically mentioned Kand by name. Mansfield did not inquire further as to the distributor contracts or the nature of Freund's obligations under them. On November 3, Freund and Mansfield executed a contract making Mansfield the exclusive distributor of Freund products. The contract was effective as of December 15. On November 11, Freund notified its dealers, including Kand, that it was terminating distributor contracts with them on December 13.

Kand brought its original complaint against Freund for breach of contract, breach of the duty of good faith and fair dealing, and promissory estoppel. Subsequently, Kand filed an amended complaint adding Mansfield as a defendant. Kand alleged that Mansfield had tortiously interfered with the Freund-Kand contract by inducing the breach and that Mansfield intentionally interfered with Kand's contractual relations with Kand's hospital-customers. Kand sought punitive damages from Mansfield. Kand has since settled with Freund; however, Freund remains a party to the litigation because of a cross-claim filed against it by Mansfield.

Mansfield moved for summary judgment. The court found that there were no genuine issues of material fact, and that the facts, when construed in the light most favorable to Kand, were insufficient to hold Mansfield liable for intentional inducement of contractual breach. The court also found Mansfield was excused from any liability because it was a "privileged" actor. Finally, the district court rejected Kand's separate claim against Mansfield for allegedly interfering with Kand's "contractual" relationship with various hospital-customers.

Kand appeals the district court's grant of summary judgment to Mansfield. Specifically, Kand objects to the court's finding that Mansfield was privileged in its negotiations with Freund and did not possess actual malice toward Kand when it induced Freund to terminate the distributor contracts. Kand also appeals the court's finding that Mansfield did not intentionally interfere with Kand's contractual relations with its hospital-customers.

We examine an appeal of a summary judgment utilizing the same standard of review employed by the district court when it heard the original motion. Qualicare-Walsh, Inc. v. Ward, 947 F.2d 823, 825 (6th Cir.1991). Summary judgment is proper if "the pleadings, depositions, answers to interrogatories, and admissions on file, together with affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c) (emphasis added). See Canderm Pharmacal, Ltd. v. Elder Pharmaceuticals, Inc., 862 F.2d 597, 601 (6th Cir.1988) (quoting Fed.R.Civ.P. 56(c)). A court reviewing summary judgment determinations must determine if there are specific material facts in dispute. Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 2552, 91 L.Ed.2d 265 (1986). Demonstration of simply "metaphysical doubt as to the material facts" is insufficient. Matsushita Electric Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586, 106 S.Ct. 1348, 1355, 89 L.Ed.2d 538 (1986). We have held that "a dispute about a material fact must be 'genuine' such that it concerns evidence upon which the jury could return a verdict for the nonmoving party." Qualicare, 947 F.2d at 826 (citing Anderson v. Liberty Lobby, 477 U.S. 242, 248, 106 S.Ct. 2505, 2510, 91 L.Ed.2d 202 (1986)). Generally, but not always, summary judgment is considered inappropriate where the issues involve intent. Canderm, 862 F.2d at 601.

Under Ohio law, we look at plaintiff's claim for intentional interference with contractual relations by reference to the analysis found in the Restatement (Second) of Torts, § 766. Heheman v. E.W. Scripps Co., 661 F.2d 1115, 1126-27 (6th Cir.1981). Heheman noted that contractual interference occurs where "one who without a privilege to do so, induces or otherwise purposefully causes a third party not to enter into, or continue, a business relationship with another, or perform a contract with another." Id. (citing Juhasz v. Quik Shops, Inc., 55 Ohio App.2d 51, 57, 9 O.O.3d 216, 219, 379 N.E.2d 235, 238 (1977)).

Here, the district court found the facts, when construed in the manner most beneficial to Kand, could permit an inference that Mansfield's negotiations with Freund prior to the termination of the distributor contracts on November 11, "caused" Freund's breach of contract with Kand. We agree with the court's determination that a genuine issue of material fact exists in this regard.

Despite the district court's initial determination that Mansfield could be construed as "causing" Freund to breach its contract with Kand, the court found that Mansfield did not have the requisite intent to induce a contractual breach. The court further found that Mansfield was not culpable under prevailing Ohio tort law because Mansfield was a privileged actor. The court found that Mansfield was privileged because it did not intend to harm Kand and was only acting to further its legitimate economic interests.

Ohio law recognizes the defense of privilege, which is the subject of sections 766 and 767 of the Restatement (Second) of Torts. Heheman, 661 F.2d at 1127. Comment (b) to section 767 states:

The issue in each case is whether the interference is improper or not under the circumstances; whether, upon a consideration of the relative significance of the factors involved, the conduct should be permitted without liability, despite its effect of harm to another. The...