Mason v. Wal-Mart Stores, Inc., WAL-MART

• Decision Date: 30 April 1998
• Docket Number: No. 96-1351,WAL-MART,96-1351
• Citation: 969 S.W.2d 160,333 Ark. 3
• Parties: , 13 IER Cases 1742 John M. MASON, Appellant, v.STORES, INC., Appellee.
• Court: Arkansas Supreme Court

Page 160

969 S.W.2d 160

333 Ark. 3, 13 IER Cases 1742

John M. MASON, Appellant, v. WAL-MART STORES, INC., Appellee.

No. 96-1351.

Supreme Court of Arkansas.

April 30, 1998.

Kent J. Rubens, West Memphis, Mack Glover, Malvern, Timothy O. Dudley, Little Rock, for Appellant.

Peter G. Kumpe, Leon Holmes, Katharine R. Cloud, Little Rock, for Appellee.

NEWBERN, Justice.

John M. Mason appeals from a summary judgment awarded to Wal-Mart Stores, Inc. ("Wal-Mart"), on Mr. Mason's claim for tortious interference with a contractual relationship and business expectancy. We affirm the judgment because the evidence presented by Mr. Mason did not demonstrate that Wal-Mart's conduct was improper.

Mr. Mason worked as an independent sales representative for three vendors who sold products to Wal-Mart for resale. Century Products Company ("Century"), Okla Homer Smith Furniture Manufacturing Company ("Okla Homer"), and Pentech International Inc. ("Pentech"), each had an account with Wal-Mart, and Mr. Mason, on a purely at-will basis, served as their sales representative to Wal-Mart.

For more than a decade, Wal-Mart exhibited discontent with dealing with independent manufacturers' representatives like Mr. Mason. On November 6, 1991, David Glass, Wal-Mart president and CEO, issued a letter to some, if not all, of its vendors expressing Wal-Mart's preference for dealing directly with "principals" of the vendors.

The letter, which was reported in a major article in The Wall Street Journal, mentioned the rapid growth of Wal-Mart and the desirability on the part of Wal-Mart and its suppliers to be able to forecast each other's needs and to react quickly. It mentioned new computer systems by which Wal-Mart shared information with its vendors, and it referred to the extra reaction time created by dealing through a third party in addition to the "high risk of misunderstandings" inherent in the system using independent representatives.

The letter defined a "principal" as "an employee of your company empowered to make decisions and act in your behalf." Excluded were individuals claiming "to be a 'principal' of one or more other companies." The letter concluded by stating that the vendor would be "contacted" later to learn whether it agreed to accept Wal-Mart's "decision that it is in the best interest of our company and our customers to deal directly with the principals of your company."

Shortly after Wal-Mart issued that letter, Century, Okla Homer Smith, and Pentech removed Mr. Mason from their Wal-Mart accounts, and Century and Pentech hired new persons to handle the Wal-Mart account "in house." Mr. Smith at Okla Homer dealt with Wal-Mart himself, as he said he had always done, even while Mr. Mason was working for him. Mr. Mason was not terminated by Century; rather, he was kept on there, but he dealt with other accounts. He was terminated by Pentech because his only role there had been to assist on the Wal-Mart account. Mr. Mason ultimately ceased working for all three vendors.

Mr. Mason sued Wal-Mart, alleging that he had a contract with Century and Okla Homer to act as their representative to Wal-Mart. Those contracts, he alleged, were in effect from July 1967 through the early part of 1992. He also alleged that he had a contract with Pentech from August 1980 to December 1991. Mr. Mason alleged that he was paid a commission by those vendors on the sales of their products to Wal-Mart and that, in light of his highly regarded performance, his contractual relationships could reasonably have been expected to continue.

The interference with his contractual relationships and business expectancies was described as Wal-Mart's use of its economic power to coerce Mr. Mason's employers to terminate his contracts with them. The complaint referred to Mr. Glass's letter and mentioned an incident that allegedly occurred in 1982 when a Wal-Mart employee asked Century to terminate its relationship with Mr. Mason and pass on to Wal-Mart any savings thus achieved.

In its motion for summary judgment, Wal-Mart asserted that "the undisputed facts demonstrate that Wal-Mart did not improperly interfere with Mason's contractual relationships and did not induce Century, Okla Homer Smith or Pentech to breach any contract with Mason. Moreover, Wal-Mart's conduct was privileged."

The Trial Court granted Wal-Mart's motion, holding that Mr. Mason "cannot present proof of improper interference as required in an intentional interference with a contractual relationship claim" and that, "when a party cannot present proof on an essential element of its claim, there is no remaining genuine issue of material fact thereby entitling the party moving for summary judgment to a judgment as a matter of law." The Trial Court said that an interference in a contractual relationship must be "improper" in order to be "actionable."

The Trial Court relied on factors listed in the RESTATEMENT (SECOND) OF TORTS § 767, and on Conoco Inc. v. Inman Oil Co., Inc., 774 F.2d 895 (8th Cir.1985), an opinion discussing § 767, to determine whether Wal-Mart's actions could be viewed as "improper interference." The Trial Court conceded that "economic pressure can constitute improper conduct," but it said that Wal-Mart's conduct did "not amount to improper, actionable conduct under the elements required for an intentional interference with a contractual relationship claim." The Trial Court said that "competitive conduct which is neither illegal nor independently actionable does not become actionable because it interferes with another's contractual relations," citing Amerinet, Inc. v. Xerox Corp., 972 F.2d 1483, 1507 (8th Cir.1992).

The Trial Court addressed the alleged 1982 incident, saying that, even if testimony about that conversation could be admitted at trial, it was "insufficient to establish a prima facie case of improper conduct on the part of Wal-Mart." Thus, the Trial Court concluded that Mr. Mason could not "establish a prima facie case of intentional interference with a contractual relationship claim against Wal-Mart." Wal-Mart's privilege claim was not addressed.

Mr. Mason argues first that the Trial Court "improperly imposed an element of proof on Mason which the law does not require"--namely, the requirement to prove that the alleged interference by the defendant was "improper" or "wrongful." Secondly, he contends that, even if impropriety or wrongfulness is an element of his claim, summary judgment was inappropriate because he adduced sufficient evidence of improper or wrongful conduct on Wal-Mart's part to create a genuine issue of material fact. Ark. R. Civ. P. 56(c).

1. The "impropriety" requirement

To understand our conclusion that it is necessary for the plaintiff in an interference-with-contract claim to demonstrate that the conduct of the defendant was at least improper, it is helpful to consider the tort's modern history in the law of this State. It begins with Mason v. Funderburk, 247 Ark. 521, 446 S.W.2d 543 (1969), in which a sales manager for a company selling books to schools alleged that members and administrators of a school board wrongfully caused him to lose his job by defaming him. Obviously, the defamatory conduct alleged was tortious in itself. We reversed a summary judgment that had been awarded against some of the defendants. In the course of the opinion, we referred to the misconduct alleged as malicious, wilful, without legal justification, without privilege, and tortious. Thus, we clearly contemplated that a plaintiff alleging interference with a contract establish that the defendant did something wrongful or improper. In Elliott v. Elliott, 252 Ark. 966, 482 S.W.2d 123 (1972), we affirmed a directed verdict with respect to a claim of interference with a land-sale contract, citing the Mason case and pointing out that the interference was required to be with malice.

In Stebbins & Roberts, Inc. v. Halsey, 265 Ark. 903, 582 S.W.2d 266 (1979), we adopted a new approach. Mr. Halsey had been a paint salesman for Stebbins & Roberts, Inc. ("Stebbins"). He took a similar position with PPG Company. It was alleged that, despite a covenant in his contract with Stebbins not to compete for one year, he began calling on his former Stebbins customers. A Stebbins employee called PPG, informed it of the anti-competition agreement, and announced he planned to sue Mr. Halsey, make an example of him, and "name" PPG in the process. Mr. Halsey was fired by PPG, so he sued Stebbins for interference with his contract. In holding that Stebbins was not entitled to a directed verdict, we adopted the view expressed in PROSSER ON TORTS (4th ed.1971), that, once Mr. Halsey had shown a "wrongful" interference with his contract, Stebbins would be required to show that its conduct was "privileged," thus shifting to the defendant the burden of going forward with the evidence.

In the case of Walt Bennett Ford, Inc. v. Pulaski Co. Spec. Sch. Dist., 274 Ark. 208, 624 S.W.2d 426 (1981), Walt Bennett Ford ("Bennett") and the Jim Nabors Company ("Nabors") each bid on school buses to be purchased by the school district. Nabors prevailed, and Bennett sued members of the school board, claiming they had "maliciously and willfully interfered" with its business expectancy. We held that, by awarding the contract to the low bidder, Nabors, the school board members had protected the tax payers' interest and had not acted in bad faith. In a supplemental opinion denying rehearing, we wrote:

The general rule is that an improper motive or bad faith is no longer an essential part of the plaintiff's case in the tort of interference with existing contractual relations. However, the defendant may show that his interference was privileged. Stebbins & Roberts, Inc. v. Halsey, 265 Ark. 903, 582 S.W.2d 266 (1979).... Our rule announced in Stebbins, supra, that bad faith is no longer an essential part of the plaintiff's case in the tort of interference with contractual relations is in no...