Newton Ins. Agency v. Caledonian Ins. Group, Inc.
| Decision Date | 12 August 2002 |
| Docket Number | No. 48753-1-I.,48753-1-I. |
| Citation | 114 Wn. App 151,52 P.3d 30,114 Wash. App. 151 |
| Court | Washington Court of Appeals |
| Parties | NEWTON INSURANCE AGENCY, & BROKERAGE, INC., a Washington corporation, Respondent, v. CALEDONIAN INSURANCE GROUP, INC., a Washington corporation, Appellant. |
Phillip D. Noble, Helsell Fetterman Martin Todd & Hokanson, Seattle, WA, for respondent.
Charles Edward Watts, Oseran Hahn Spring & Watts, Bellevue, WA, for appellant.
In this action for tortious interference and civil conspiracy, no questions of fact exist about Caledonian Insurance Group's liability to Newton Insurance Agency, or about the amount of damages. The trial court therefore properly granted summary judgment in favor of Newton, and we affirm.
In 1994, Newton Insurance Agency and Brokerage, Inc. purchased an insurance business from Terry Lynch, including all Lynch's accounts and customer base. The parties' agreement contained a noncompetition clause prohibiting Lynch from later competing for those accounts. Lynch agreed not to:
A. Request or advise any of the clients who have been transferred by [Lynch] to [Newton] to withdraw or cancel insurance with [Newton]; [or]
B. Solicit, sell, serve, divert, or receive insurance agency, brokerage, actuarial, or employee—benefit reporting business to or from any such client.1
Newton also hired Lynch as an insurance agent. The employment agreement contained an additional noncompetition clause covering all later-acquired accounts. The agreement provided that the accounts generated by Lynch would be owned by Newton, and that Newton's offer to hire Lynch was expressly conditioned upon his agreement not to:
(a) Solicit, sell, serve, divert, [or] accept the customers, trade or business, or interfere with policy contracts of the [Newton] Agency or any client having any coverage with the [Newton] Agency existing as of the date of notice of [Lynch's] termination, [or] any prospective account being actively solicited by the Agency at that time;
. . . .
(c) Be an employee, employer, consultant, officer, director, partner, trustee, or shareholder of more than 1% of the outstanding stock of any person or entity that doe any of the activities just listed.2
After learning that Lynch was selling insurance and keeping the commissions for himself, Newton fired Lynch on December 20, 1999. Three days later, Lynch was hired as vice-president and insurance producer for Caledonian Insurance Group. Caledonian president Anthony Cowan acknowledged that he and Lynch discussed Lynch's noncompetition agreements. He also testified that Caledonian hired Lynch expecting to obtain business from Newton's customers:
It is undisputed that with the knowledge of Caledonian, Lynch contacted, obtained business from, and sold insurance to Newton customers:
Newton filed suit to enforce the noncompetition agreements and obtained an order to show cause why a preliminary injunction should not be entered. Lynch was served with the order on December 23, the day he started working at Caledonian. He told Cowan about the order the same day. Contending his obligation under the noncompetition agreements had been discharged by his personal bankruptcy in 1996, Lynch removed the proceedings to bankruptcy court. Between the day Lynch received the order to show cause and the bankruptcy hearing on January 10, 2000, Lynch continued to contact Newton customers, and had them sign "Broker of Record" letters transferring their business from Newton to Caledonian. The bankruptcy court held that Lynch's noncompetition obligations were not discharged by his personal bankruptcy, and entered a preliminary injunction. Lynch nevertheless continued to contact Newton customers and transfer their business to Caledonian.
The bankruptcy court remanded to state court for further proceedings. Newton asserted claims for breach of the noncompetition agreements and tortious interference with business expectations. Lynch requested arbitration as provided by the agreements. The arbitrator determined that Lynch had wrongfully breached his noncompetition agreements, had tortiously interfered with Newton's business relationships, and had breached his fiduciary duties to Newton. The arbitrator entered an award granting Newton a permanent injunction, damages, and attorney fees. The damages were based on expert testimony establishing that the accepted method for evaluating a lost book of insurance business was to use a multiple of annual commissions. The arbitrator awarded $281,913.82 in damages, representing two times the lost annual commissions from 27 accounts.5
Newton filed a separate action against Caledonian, alleging tortious interference and civil conspiracy. The trial court granted Newton's motion for summary judgment as to both liability and damages. Caledonian appeals.
Summary judgment is appropriate when the pleadings, depositions, and admissions on file, together with the affidavits, if any, show that there is no genuine issue about any material fact and, assuming facts most favorable to the non-moving party, establish that the moving party is entitled to judgment as a matter of law.6 In opposing summary judgment, a party may not rely merely upon allegations or self-serving statements, but must set forth specific facts showing that genuine issues of material fact exist.7
To prove tortious interference with a business expectancy, a plaintiff must show (1) the existence of a valid contractual relationship or business expectancy; (2) that the defendant had knowledge of that expectancy; (3) an intentional interference inducing or causing a breach or termination of the relationship or expectancy; (4) that the defendant interfered for an improper purpose or used improper means; and (5) resulting damage.8
A valid business expectancy includes any prospective contractual or business relationship that would be of pecuniary value.9 Newton had a valid business expectancy in all of its customers, including those it purchased from Lynch's insurance business and those serviced by him as Newton's employee.
Caledonian admits that it knew of Lynch's noncompetition agreements, and still offered Lynch a job expecting his former clients to follow him from Newton. Lynch and Caledonian therefore had knowledge of Newton's expectancy.
Interference with a business expectancy is intentional "if the actor desires to bring it about or if he knows that the interference is certain or substantially certain to occur as a result of his action."10 It is undisputed that Lynch prepared and sent "Broker of Record" transfer letters to his former clients. Lynch and Caledonian both intended that Lynch's former customers would switch from Newton to Caledonian.
The first three elements of the tort are thus undisputed. Caledonian's liability for interference turns solely on whether a question of fact remains about the improper purpose element.
Interference is for an improper purpose if it is wrongful by some measure beyond the interference itself, such as a statute, regulation, recognized rule of common law, or an established standard of trade or profession.11
Caledonian argues that whether Lynch's interference was improper is a question for the trier of fact:
[A]s with negligence, when there is room for different views, the determination of whether the interference was improper or not is ordinarily left to the jury, to obtain its common feel for the state of community mores and for the manner in which they would operate upon the facts in question.12
Under certain circumstances, however, "identifiable standards of business ethics or recognized community customs as to acceptable conduct" have developed, such that "the determination of whether the interference was improper should be made as a matter of law, similar to negligence per se."13 Interference with a business expectancy in violation of a contract not to compete is such a case.14
Caledonian contends, however, that Lynch's actions were not improper, because Lynch's personal bankruptcy attorney told Lynch and Caledonian that Lynch's agreements not to compete were potentially unenforceable because they were discharged in Lynch's personal bankruptcy. Caledonian cites no authority for the proposition that the advice of counsel, whether reasonable or not, provides a shield against liability. Here, the advice was wrong, and was at best highly tenuous. Reasonable minds could not differ as to the impropriety of Lynch's conduct.
Lynch was undisputedly Caledonian's agent. An agency relationship exists where the principal consents to the agent's actions on the principal's behalf.15 A principal is liable for the acts of his or her agent committed while the agent is acting within the scope of the agency.16 It is undisputed that Lynch was acting in furtherance of...
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