Stewart Title v. American Abstract & Title, 04-789.

• Decision Date: 13 October 2005
• Docket Number: No. 04-789.,04-789.
• Parties: STEWART TITLE GUARANTY COMPANY, Appellant, v. AMERICAN ABSTRACT & TITLE COMPANY, Appellee.
• Court: Arkansas Supreme Court

215 S.W.3d 596

STEWART TITLE GUARANTY COMPANY, Appellant, v. AMERICAN ABSTRACT & TITLE COMPANY, Appellee.

No. 04-789.

Supreme Court of Arkansas.

October 13, 2005.

Gill Elrod Ragon Owen & Sherman, P.A., by: Marie-Bernadette Miller, Derrick Davidson, Little Rock, for appellant.

David M. Hargis, Little Rock, for appellee.

JIM GUNTER, Justice.

This appeal arises from a jury verdict in favor of appellee, American Abstract & Title Company, Inc. (Abstract), a title insurance agent in Pulaski County, against appellant, Stewart Title Guaranty Company (Guaranty) for tortious interference with business expectancy. Guaranty is a title insurance underwriter with its principal place of business in Houston, Texas, and Stewart Title of Arkansas, Inc. (STAR) is Guaranty's title insurance agent in Pulaski County. Guaranty appeals the jury's verdict, arguing that Abstract did not have a valid business expectancy with Guaranty, and that we should reverse the jury's award of one million dollars in compensatory and punitive damages. We affirm the jury's verdict.

On August 27, 2003, Abstract filed a second amended and substituted complaint, alleging that Guaranty and STAR engaged in interference with business expectancy in violation of the Arkansas Unfair Practices Act, codified at Ark.Code Ann. § 4-75-201 et seq. (Repl.2001), Article 2, Section 19 of the Arkansas Constitution, and the Real Estate Settlement Procedures Act, codified at 12 U.S.C. § 2617(a) (1994). Specifically, Abstract alleged that Guaranty entered into "sham transactions," or alleged kickback schemes, involving Real Estate Central, Roddy McCaskill and Truman Ball, Jeff Fuller, Val Hansen with Re/Max Realty, and Rainey Realty. Abstract made the following allegations with regard to these alleged kickback schemes. First, Guaranty established "marketing agreements," which were promoted under the guise of business promotion and advertising, with McCaskill and Ball, Rainey Realty, and Real Estate Central that were alleged kickback schemes through which these realty companies allegedly received money through closing and title services in exchange for business referrals. Second, Guaranty implemented a TitleMax program whereby Fuller and Hansen created shell corporations, which became Guaranty's agents, and Fuller and Hansen's customers were referred through these shell corporations to Guaranty for all the closing and title services, whereupon Fuller and Hansen were paid sums of money from those closing services for every customer steered in this manner. Third, Guaranty and STAR paid the salaries of their employees who provided their services as "closing coordinators" to real estate brokerage firms, namely Rector Phillips Morse and Rainey Realty, and those employees were paid bonuses, depending on how many referrals of closing services could be steered to appellants. Abstract also alleged that the customers did not have the knowledge that the closing services and the title insurance costs would be significantly higher in price to cover these referral costs. Abstract further alleged that Guaranty made donations to his church at the directive of Roddy McCaskill from 1999 until February 2000, and called these donations payments for referrals of the closing and title insurance business. In its complaint, Abstract asserted that "these expenditures demonstrate that over one million dollars ($1,000,000.00) has been injected into the market by [STAR] with [Guaranty] directly supplying the funds ... with the intent and with the result that fair competition would be injured in the economic market, all such kickbacks having the effect of destroying competition in the economic market[.]"

Guaranty denied that it interfered with Abstract's business expectancy. Guaranty maintained that its practices were lawful marketing programs directed at the real estate market for the purpose of recruiting real estate agents to refer Guaranty customers.

On October 16, 2003, a jury was empaneled, and Abstract presented its claims for violation of Ark.Code Ann. § 4-75-208 of the Arkansas Unfair Practices Act and for tortious interference of business expectancy. On October 24, 2003, at the conclusion of Abstract's case, Guaranty and STAR made a written motion for directed verdict, arguing that Abstract did not prove (1) an intentional inference and (2) a valid business expectancy. During a hearing on the motion, counsel for Guaranty and STAR argued that Abstract failed to prove that there was intentional interference. The trial court granted Guaranty and STAR's motion with respect to Roddy McCaskill, but denied the remainder of the motion. At the conclusion of the evidence at trial, Guaranty and STAR renewed their motion for directed verdict, and the trial court denied the motion.

On October 28, 2003, the jury found in favor of Abstract on its claim for tortious interference with business expectancy, and awarded Abstract $500,000.00 in compensatory damages and $500,000.00 in punitive damages. The jury rendered its verdict in favor of Guaranty and STAR on the remaining claims. On November 6, 2003, the trial court entered a judgment consistent with the jury's verdict. The trial court's order contains the following verdict interrogatory:

Do you find from a preponderance of the evidence that American Abstract and Title Company, Inc., should receive judgment against Stewart Title Guaranty Company on the claim by American Abstract and Title Company, Inc., for interference with its business expectancies?

                              Answer: ____ Yes_____
                

This verdict form was then signed by the foreman as a unanimous verdict.

Subsequently, on November 18, 2003, Guaranty filed a motion for judgment notwithstanding the verdict and a motion to reduce the jury verdict. A hearing on both motions was held on December 12, 2003. At that hearing, Guaranty argued that the jury's verdict should be overturned because Abstract's case was based upon its past relationship with customers, and it failed to present any proof that a business expectancy existed. Abstract argued that Guaranty promoted its business by developing improper marketing schemes. The trial court denied both of Guaranty's motions.

Guaranty's appeal is taken from the trial court's denial of Guaranty's motions for directed verdict, the denial of Guaranty's motion for judgment notwithstanding the jury's verdict, the denial of Guaranty's motion for remittitur of the compensatory and punitive damage awards, and the entry of judgment that reflects the jury's verdict against Guaranty on Abstract's claim for interference with business expectancy.

I. Tortious interference with business expectancy

A. Existence of a "business expectancy"

For its first point on appeal, Guaranty argues that, as a matter of law, Abstract did not possess a valid business expectancy. Specifically, Guaranty contends that no contract existed between Abstract and third-party real estate companies and their agents. Additionally, Guaranty argues that Abstract's past dealings with customers would not entitle it to a future right of referrals from past customers.

In response, Abstract argues that Guaranty bought business away from other competitors by devising kickback marketing with the full knowledge that these schemes violated the law. Specifically, Abstract maintains that substantial evidence of valid economic expectations was presented to the jury, including testimony from many realtors who described ongoing business relationships with Abstract.

Our standard of review of the denial of a motion for directed verdict is whether the jury's verdict is supported by substantial evidence. Ethyl Corp. v. Johnson, 345 Ark. 476, 49 S.W.3d 644 (2001). Similarly, in reviewing the denial of a motion for JNOV, we will reverse only if there is no substantial evidence to support the jury's verdict and the moving party is entitled to judgment as a matter of law. Id. Substantial evidence is that which goes beyond suspicion or conjecture and is sufficient to compel a conclusion one way or the other. Id. It is not this court's place to try issues of fact; rather, this court simply reviews the record for substantial evidence to support the jury's verdict. Id. In determining whether there is substantial evidence, we view the evidence and all reasonable inferences arising therefrom in the light most favorable to the party on whose behalf judgment was entered. Id.

With this standard of review in mind, we turn to the applicable law. In Arkansas, we have recognized the tort of interference with business expectancy. W.E. Long Co. v. Holsum Baking Co., 307 Ark. 345, 820 S.W.2d 440 (1991). In Mason v. Funderburk, 247 Ark. 521, 528, 446 S.W.2d 543, 548 (1969), we gave a historical perspective of tortious interference with business expectancy, where we stated:

Intentional and unjustified third-party interference with valid . . . business expectancies constitutes a tort, with its taproot embedded in early decisions in the courts of England ... [T]he tort has become engraved upon American law, generally unsullied in principle ... The fundamental premise of the tort—that a person has a right to pursue his valid . . . business expectancies unmolested by the wrongful and officious intermeddling of a third party—has been crystallized and defined in Restatement, Torts Sec. 766.

Mason, 247 Ark. at 528, 446 S.W.2d at 548.

To establish a claim of tortious interference with business expectancy, Abstract must prove: (1) the existence of a valid contractual relationship or a business expectancy; (2) knowledge of the relationship or expectancy on the part of the interfering party; (3) intentional interference inducing or causing a breach or termination of the relationship or expectancy; and (4) resultant damage to the party whose relationship or expectancy has been disrupted. Vowell v. Fairfield Bay Community Club, Inc., 346 Ark. 270, 276-77, 58 S.W.3d 324, 329 (2001). In addition to the above requirements, we have stated...