Lewis v. Oregon Beauty Supply Co.

• Decision Date: 31 March 1987
• Citation: 733 P.2d 430,302 Or. 616
• Parties: , 2 IER Cases 1135 Karen LEWIS, Respondent on Review, v. OREGON BEAUTY SUPPLY CO., Lawrence Stebbeds, and Scott Stebbeds, Petitioners on Review. TC 8206-03404; CA A32019; SC S32697; SC S32703.
• Court: Oregon Supreme Court

Page 430

733 P.2d 430

302 Or. 616, 2 IER Cases 1135

Karen LEWIS, Respondent on Review, v. OREGON BEAUTY SUPPLY CO., Lawrence Stebbeds, and Scott

Stebbeds, Petitioners on Review.

TC 8206-03404; CA A32019; SC S32697; SC S32703.

Supreme Court of Oregon.

Argued and Submitted July 2, 1986.

Decided Feb. 24, 1987.

Reconsideration Denied March 31, 1987.

[302 Or. 617-A] Duane Vergeer, Portland, argued the cause for petitioners on review Oregon Beauty Supply Co. and Lawrence Stebbeds. With him on brief was Thomas Sauberli, Portland.

Carol A. Hewitt, Portland, argued the cause and filed a brief for petitioner on review Scott Stebbeds. With her on brief were Lloyd W. Weisensee, Barry L. Adamson and Williams, Frederickson, Stark, Norville & Weisensee, P.C., Portland.

Richard C. Baldwin, Portland, argued the cause for respondent on review. With her on brief was Baldwin & Brischetto, Portland.

Before PETERSON, C.J., and LENT, LINDE, CAMPBELL, CARSON and JONES, JJ.

CAMPBELL, Justice.

This case involves the torts of intentional infliction of severe emotional distress and intentional interference with an economic relationship. The case also involves three defendants: Oregon Beauty Supply Company (OBSC), Scott Stebbeds and his father, Lawrence Stebbeds. The relationship of each defendant to each claim raises independent issues.

There was evidence from which a jury could find the following facts: Plaintiff was employed by OBSC beginning in 1980. She initially handled shipping, packing and receiving and was subsequently promoted to a sales position. It was her responsibility to develop a telemarketing system in the Portland metropolitan area, and she was exclusively responsible for sales in that area. Plaintiff worked directly for Lawrence Stebbeds, the principal owner and manager of OBSC. Lawrence's son, Scott, supervised the OBSC warehouse where plaintiff's office was located.

In 1981 plaintiff and Scott Stebbeds began dating. When plaintiff decided that she wanted to see other men, Scott became jealous. On one occasion he became intoxicated and refused to allow her to leave a tavern; he followed her into her car, insisted on a ride home, and refused to leave the vehicle. Plaintiff asked several passers-by for assistance and a fight resulted between Scott and those individuals. Thereafter plaintiff refused to date Scott.

Scott reacted in a hostile manner. He exhibited his hostility towards plaintiff in the workplace. He "glared" at her from outside her office and told other employes that she had given him a venereal disease. He swore at her, called her a whore, searched her personal belongings and threw things at her. He refused to cooperate with her when she required information necessary to function in her job and would "fling" merchandise and paperwork into her office. On one occasion he intentionally slammed a door which hit plaintiff. He also told other employes that plaintiff would not be working at OBSC much longer.

Plaintiff responded by complaining to Lawrence Stebbeds. Lawrence said that he would talk to Scott. The harassment continued. Plaintiff complained to another supervisor, who attempted to speak with Scott without success. The harassment continued, and plaintiff again went to Lawrence. Lawrence again said that he would speak to Scott, but that Scott would continue to work for OBSC and plaintiff could quit if she liked, although Lawrence encouraged her to stay. The harassment continued.

Approximately six months after the harassment began, plaintiff asked Lawrence for one month off in order to search for other employment. She asked Lawrence to keep Scott away from her during that time. Lawrence agreed that it would be best if plaintiff quit. She did so and subsequently filed these claims against Scott, Lawrence and OBSC.

At the close of plaintiff's case the trial judge granted directed verdicts in favor of OBSC and Lawrence Stebbeds on the intentional infliction of severe emotional distress claim. ¹

On the intentional interference with an economic relationship claim the judge granted OBSC a directed verdict. The jury returned a verdict against both individual defendants on that claim and awarded plaintiff general damages of $65,000. The jury also awarded $75,000 in punitive damages against Lawrence and $25,000 in punitive damages against Scott. The trial court subsequently granted Lawrence's motion for a judgment notwithstanding the verdict. A similar motion by Scott was denied.

Plaintiff appealed the judgment notwithstanding the verdict in favor of Lawrence on the interference claim and the directed verdicts granted to him and OBSC on the emotional distress claim. Defendant Scott Stebbeds cross-appealed the denial of his motion for judgment notwithstanding the verdict on the interference claim. He also argued that the award of punitive damages violated Article I, section 8, of the Oregon Constitution.

The Court of Appeals upheld the jury verdict and punitive damages award against Scott on the interference with an economic relationship claim and reinstated the jury verdict and punitive damages award against Lawrence on the same claim. The court affirmed the directed verdict on the interference claim with respect to OBSC. The court reversed and remanded plaintiff's claims against Lawrence and OBSC for emotional distress. 77 Or.App. 663, 714 P.2d 618 (1986). All three defendants filed petitions for review, which we allowed.

For the reasons stated herein, we affirm the trial court. The decision of the Court of Appeals is reversed in part and affirmed in part.

Because of the confusion involved in discussing three defendants and two independent claims, we will address one claim at a time. We will discuss the punitive damages issue last.

A. Intentional Interference with an Economic Relationship

Before determining whether plaintiff has made out valid interference with economic relationship claims there is a preliminary issue to resolve. It involves the nature of an at-will employment contract. The general rule in this state is that employment contracts are terminable at will; this means that absent some contrary agreement an employer ordinarily may discharge an employe for any reason and at any time. Patton v. J.C. Penney Co., 301 Or. 117, 120, 719 P.2d 854 (1986); Simpson v. Western Graphics, 293 Or. 96, 99, 643 P.2d 1276 (1982); Swanson v. Van Duyn Choc. Shops, 282 Or. 491, 493, 579 P.2d 239 (1978). The issue is whether an at-will employment contract can form the basis of an interference claim.

The very label of "contract terminable at will" assumes that the parties have a contractual relationship. What the label implies is that the durational element has been left open. Mallor, Punitive Damages for Wrongful Discharge of At Will Employees, 26 Wm & Mary L Rev 449, 453 (1985). This open-endedness should not affect the legitimacy of the agreement itself or the amount of protection available to the parties against interference by a third person. "The interest protected by the interference with contract action is the interest of the individual in the security and integrity of the contractual relations into which he has entered." Wampler v. Palmerton, 250 Or. 65, 73, 439 P.2d 601 (1968).

The parties to an at-will employment relationship have no less of an interest in the integrity and security of their contract than do any other contracting parties. We agree with the statement that until such a contract is terminated "a contract is valid and subsisting, and the defendant may not properly interfere with it." Restatement (Second) of Torts § 766, comment g at 10-11 (1979); see also McCarthy, Punitive Damages In Wrongful Discharge Cases 258, § 4.10 (1985).

The tort of interference with an economic relationship has been recognized and developed by this court over the last two decades. In Wampler v. Palmerton, supra, we reviewed the historical lineage of claims for wrongful interference and set out the interests to be protected by that tort. See also Straube v. Larson, 287 Or. 357, 600 P.2d 371 (1979); Top Service Body Shop v. Allstate Ins. Co., 283 Or. 201, 582 P.2d 1365 (1978). From these cases we derive the elements of a valid interference claim: "Either the pursuit of an improper objective of harming plaintiff or the use of wrongful means that in fact cause injury to plaintiff's contractual or business relationships may give rise to a tort claim for those injuries." 283 Or. at 205, 582 P.2d 1365. The question here is whether the facts as proved meet the elements of the tort.

1. Defendant Scott Stebbeds

In order to make out a claim for intentional interference with a contract plaintiff must show that Scott acted intentionally. See Top Service Body Shop, Inc. v. Allstate Ins. Co., supra; Straube v. Larson, supra. This intent standard is somewhat flexible:

" * * * [E]ven if [a defendant] does not act for the purpose of interfering or does not desire it but knows that the interference is substantially certain to occur from his action and is a necessary consequence thereof, his interference is intentional as contemplated by the rule. Restatement (Second) of the Law of Torts § 766, comments (h ) and (j )."

Straube v. Larson, supra, 287 Or. at 361, 600 P.2d 371; see also Wampler v. Palmerton, supra, 250 Or. at 73, 439 P.2d 601 (interference must be knowing and not inadvertent or merely incidental).

Scott's conduct comes within this definition. There was testimony that he told other employes that plaintiff would not be working for OBSC much longer. He also refused to cooperate with plaintiff when she required information in order to perform her job. In fact, plaintiff testified that Scott told her: "I don't have to work with you. You've dug your hole, and you're out." Scott knew that he was interfering with plaintiff's job performance and therefore had the requisite knowledge that he was interfering with her employment relationship with OBSC.

Proof of an interference claim also requires that...