Top Service Body Shop, Inc. v. Allstate Ins. Co.

• Decision Date: 01 August 1978
• Citation: 582 P.2d 1365,283 Or. 201
• Parties: , 1979-1 Trade Cases P 62,553 TOP SERVICE BODY SHOP, INC., Appellant, v. ALLSTATE INSURANCE COMPANY, Respondent. TC 76-547; SC 25142. . *
• Court: Oregon Supreme Court

Page 1365

582 P.2d 1365

283 Or. 201, 1979-1 Trade Cases P 62,553

TOP SERVICE BODY SHOP, INC., Appellant, v. ALLSTATE INSURANCE COMPANY, Respondent.

TC 76-547; SC 25142.

Supreme Court of Oregon, In Banc. ^*

Argued and Submitted Dec. 6, 1977.

Decided Aug. 1, 1978.

[283 Or. 202-B] Ronald L. Gould, Coos Bay, argued the cause for appellant. With him on the briefs were Orrin R. Ormsbee, Craig O. West, McNutt, Gant & Ormsbee, Coos Bay.

Alan H. Silberman, Chicago, Ill., argued the cause for respondent. With him on the brief were Sonnenschein, Carlin, Nath & Rosenthal, Chicago, Ill., and Wayne Hilliard, Dezendorf, Spears, Lubersky & Campbell, Portland.

LINDE, Justice.

Plaintiff, the operator of an automobile body repair shop in Coos Bay, Oregon, sued defendant insurance company for general and punitive damages for injuries alleged to result from defendant's wrongful practices in directing insurance claimants to have repairs made at body shops other than plaintiff's. The complaint pleaded causes of action grounded in two theories: First, tortious interference with plaintiff's business, and second, inducement of other body shops to accord defendant discriminatory price advantages prohibited by statute. On the second claim plaintiff also requested an injunction. Defendant answered by general denials and an affirmative defense to the tort claim asserting a privilege of acting in its own legitimate financial interests. Plaintiff replied that defendant's methods and intent took its actions beyond any such privilege.

The trial resulted in jury verdicts for plaintiff in amounts of $20,000 compensatory and $250,000 punitive damages on the tort claim and $45,000 in treble damages on the price discrimination claim. On defendant's motion, the trial court entered judgments notwithstanding the verdicts on both causes of action, primarily for failure of proof. The court also allowed defendant's alternative motion for a new trial pursuant to ORS 18.140(3). ¹ On appeal, plaintiff assigns as error the rulings on these motions and also two rulings excluding evidence offered by it during the trial. We affirm.

I. The claim of tortious interference.

Although other jurisdictions have decided numerous claims of tortious interference with business relations, this court has had few occasions to consider the elements of this tort. See Wampler v. Palmerton, 250 Or. 65, 439 P.2d 601 (1968), and cases Id. at 73 n.8, 439 P.2d 601; American Sanitary Service, Inc. v. Walker, 276 Or. 389, 554 P.2d 1010 (1976); and Comini v. Union Oil Co., 277 Or. 753, 562 P.2d 175 (1977). We therefore begin with a brief description of the problem.

Tort claims for wrongful interference with the economic relationships of another have an ancient lineage. Their history has been traced from interference with members of another's household in Roman law or with his tenants in English law, with his workmen after the 1349 Ordinance of Labourers, with prospective workmen or customers, with existing contracts for personal services, Lumley v. Gye, 118 Eng.Rep. 749 (QB 1853), and with contracts generally, Temperton v. Russell (1893) 1 QB 715 (CA), to contemporary forms not dependent on the existence of a contract. See Wampler v. Palmerton, supra, citing Sayre, Inducing Breach of Contract, 36 Harv.L.Rev. 663 (1923); Carpenter, Interference with Contract Relations, 41 Harv.L.Rev. 728 (1928) (also published in 7 Or.L.Rev. 181, 301 (1928)). Despite these antecedents, protection in tort against interference with business relations has been described as largely a twentieth-century development. Prosser, Handbook of the Law of Torts § 129, at 927 (4th ed. 1971). A recent study regards the generalized concept of "tortious interference" as "(o)ne of the most fluid and rapidly growing tort theories," comparable to products liability, and promising to become the predominant remedy for a multitude of business wrongs. Estes, Expanding Horizons in the Law of Torts Tortious Interference, 23 Drake L.Rev. 341, 341, 363 (1974). ²

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. Prosser, Handbook of the Law of Torts § 130 at 952 (4th ed. 1971). However, efforts to consolidate both recognized and unsettled lines of development into a general theory of "tortious interference" have brought to the surface the difficulties of defining the elements of so general a tort without sweeping within its terms a wide variety of socially very different conduct. ³These difficulties are shown by the changing treatment of the subject in the American Law Institute's Restatement of the Law of Torts. The main problem is what weight to give to the defendant's objective in interfering with plaintiff's contract or with plaintiff's prospective business relations. If the focus in defining the tort is on defendant's wrongful motive or use of wrongful means, this element will likely be a necessary part of plaintiff's case. If the tort is defined primarily as an invasion of plaintiff's protected interests, defendant's reasons are likely to be treated as questions of justification or privilege. ⁴ Section 766 of the first Restatement of Torts read:

Except as stated in Section 698, one who, without a privilege to do so, induces or otherwise purposely causes a third person not to

(a) perform a contract with another, or

(b) enter into or continue a business relation with another

is liable to the other for the harm caused thereby. ⁵

The term "purposely" meant that a defendant must not only have expected, or "intended," his conduct to interfere with plaintiff's contract or business relationship but that this interference must have been at least one purpose of defendant's act. ⁶ Reasons that would excuse such an interference were then stated as "privileges" in sections 767-774.

In preparing the Restatement (Second) of Torts in 1969, the then Reporter, Dean William Prosser, proposed to change "purposely" to "intentionally" with respect to any interference with an existing contract that was not justified by a privilege. He would have retained "purposely" with respect to interference with future contractual relations. ⁷ However, the change to liability based simply on unprivileged intent was not accepted even with respect to inducing or causing breaches of existing contracts. See American Law Institute, Proceedings of the 46th Annual Meeting 179-205 (1970). The result was a revision by the succeeding Reporter, Dean John W. Wade, of the Restatement chapter dealing with the tort of interference with existing or prospective contracts or, as the Reporter described it, "interference with advantageous economic relations," which proposed significant changes in the analysis. See Restatement (Second) of Torts § 766 (Tent. Draft No. 23, 1977). As the Restatement now stands, such interference would give rise to liability if it is both intentional and affirmatively improper (replacing reliance on lack of "privilege" in the definition of the tort), and a purpose to harm the injured party would be one factor making the interference improper. Restatement (Second) of Torts §§ 766-767 (Tent. Draft No. 23, 1977). ⁸ The evolution of this "restatement" of the tort is significant here because it corresponds to a similar division in the recent decisions in this state. In Wampler v. Palmerton, supra, intentional interference with an existing contract was assumed to be prima facie tortious, unless it was justified or privileged as promoting some legitimate interest. In that case, corporate officers were held to have such a privilege in advising the corporation. 250 Or. at 73-78, 439 P.2d 601. ⁹ A similar approach was followed in North Pac. Lumber Co. v. Moore, 275 Or. 359, 551 P.2d 431 (1976), but the court held that it was plaintiff's burden to prove both that defendant intentionally interfered with plaintiff's prospective sales and that defendant had no privilege to do so. In that case, defendant was plaintiff's competitor, and the court assumed that its privilege as a competitor might be overcome by proof that it had made use of customer and market information obtained by hiring one of plaintiff's employees. The effect is that the propriety of defendant's objective or motive is really a part of plaintiff's case rather than an affirmative defense of "privilege." However, even when defendant's objectives are not improper, for instance the pursuit of competition or other legitimate interests, defendant may still be liable for using improper means to achieve these objectives.

Meanwhile, the decision in Nees v. Hocks, 272 Or. 210, 536 P.2d 512 (1975), rejected the concept that every intentional infliction of harm is prima facie a tort unless justified. Finding that this concept was no longer needed to escape the rigidity of the common-law forms of pleading, the court concluded that it created as many difficulties as it solved. ¹⁰ However, the court found that the plaintiff had effectively pleaded and proved that her discharge by defendant was tortious by reason of an improper motive.

We conclude that the approach of Nees v. Hocks is equally appropriate to claims of tort liability for intentional interference with contractual or other economic relations. In summary, such a claim is made out when interference resulting in injury to another is wrongful by some measure beyond the fact of the interference itself. Defendant's liability may arise from improper motives or from the use of improper means. They may be wrongful by reason of a statute or other regulation, or a recognized rule of common law, ¹¹ or perhaps an established standard of a trade or profession. No question of privilege arises unless the interference would be wrongful but for the privilege; it becomes an issue only if the acts charged would be tortious on the part of an unprivileged defendant. Even a...