UED v. ETS, 3436.

• Decision Date: 22 January 2002
• Docket Number: No. 3436.,3436.
• Citation: 350 S.C. 7,564 S.E.2d 324
• Parties: UNITED EDUCATIONAL DISTRIBUTORS, LLC, Appellant, v. EDUCATIONAL TESTING SERVICE, Respondent.
• Court: South Carolina Court of Appeals

350 S.C. 7

564 S.E.2d 324

UNITED EDUCATIONAL DISTRIBUTORS, LLC, Appellant, v. EDUCATIONAL TESTING SERVICE, Respondent.

No. 3436.

Court of Appeals of South Carolina.

Heard October 1, 2001.

Decided January 22, 2002.

Rehearing Denied June 19, 2002.

Bruce R. Hoffman, Beaufort, for appellant.

William B. Harvey, III, of Harvey & Battey, Beaufort; and Bruce M. Berman and Michael D. Leffel, both of Wilmar, Cutler & Pickering, of Washington, D.C., for respondent.

CONNOR, J.

United Educational Distributors, LLC ("UED") appeals the dismissal of its cause of action for "tortious interference with prospective economic advantage." We affirm.

FACTS/PROCEDURAL BACKGROUND

Educational Testing Services ("ETS"), a nonprofit corporation headquartered in Lawrenceville, New Jersey, administers, scores, and prepares testing materials for, among others, the College Level Examination Program ("CLEP"). UED sells study aids for the CLEP test, which it markets primarily to military personnel.

On October 9, 1998, UED filed its original complaint in the Court of Common Pleas for the County of Beaufort alleging ETS wrongfully interfered with UED's present and future sales contracts of its study materials. Essentially, UED alleged two tort causes of action: (1) intentional interference with present contractual relationships and (2) intentional interference with prospective economic advantage.¹ UED prayed for actual and punitive damages of not less than $1,500,000.00. On November 12, 1998, the case was removed to federal district court and UED subsequently moved to remand the case. Thereafter, on December 18, 1998, ETS filed its first motion to dismiss UED's action pursuant to Fed.R.Civ.P. 12(b)(6). UED filed its return to this motion and its first amended complaint on January 5, 1999, to which ETS moved to dismiss the amended complaint on January 14, 1999. On January 21, 1999, the action was remanded to the Beaufort County Court of Common Pleas.

ETS filed its first motion to dismiss UED's action pursuant to Rule 12(b)(6), SCRCP, on February 17, 1999.² After a hearing on ETS's motion, Judge Kemmerlin, Master in Equity and Special Circuit Judge for the Court of Common Pleas of Beaufort County, filed his order on July 12, 1999, requiring UED to re-plead its first cause of action and allowing UED to re-plead its second cause of action for intentional interference with prospective contractual relations.

UED filed its second amended complaint on July 29, 1999. For the second cause of action, UED named several people from ETS specifically and alleged they participated in ETS's "concerted effort to prevent [UED] from obtaining new business." However, UED failed to allege that ETS interfered with any specific contracts it had received or was certain to enter into. Rather, UED alleged that it "would have continued to receive responses from at least 10% of the lead cards [it] mailed." Paragraphs fourteen and fifteen of UED's second amended complaint state:

14. Businesses selling products on military bases are prohibited from selling door to door. Instead, with addresses only obtained from the military through the Freedom of Information Act (no names or telephone numbers are provided), [UED] sends out lead cards (in the Beaufort area, normally 4 mailings a year, 1500 cards mailed at a time) to all the addresses inviting calls if the recipients have an interest in the product being sold ( [UED] does not have a store front, it is a direct sales company whose business is completely dependent on generating new customers through these lead cards). As a result of [ETS's] interference, [UED] has seen the average expected response (per past history) to its lead cards in the Beaufort area drop from 10% in 1996 and 1997 to virtually none in 1998 (when the interference began) and none in 1999.

15. [UED], not having names or phone numbers, couldn't do follow-up to see why they have not been receiving the normal percentage of lead card responses, as they had in the past (i.e. [UED] has no way of knowing who didn't respond and why, they only know they don't receive responses anymore). Meanwhile, the only change in circumstance[s] from 1996 to present, and therefore the only possible cause for this quantifiable, precipitous drop in responses/business (to nothing), is [ETS's] interference.

ETS moved to dismiss UED's second amended complaint on August 16, 1999. UED responded with its return to ETS's motion to dismiss, which was followed on October 20, 1999 by ETS's "memorandum of points and authorities in further support of its motion to dismiss" the second amended complaint. UED again filed a return to ETS's addition to its motion.

On November 30, 1999, Judge Kemmerlin filed his order striking UED's second cause of action in its second amended complaint but allowing the first cause of action, stating: "I believe the First Cause of Action meets the bare bones requirements necessary to state a cause of action for `Tortious Interference With Present Contractual Relations.'" (emphasis in original). On December 20, 1999, UED filed notice of appeal from Judge Kemmerlin's order that struck UED's claim for intentional interference with prospective contractual relations.³

DISCUSSION

UED argues it sufficiently pled its cause of action for intentional interference with prospective contractual relations in its second amended complaint. Although UED has alleged facts sufficient to put ETS on notice of a cause of action generally, it has failed to plead any specific contracts to put ETS on notice of what, with some particularity, it must defend against in an intentional interference action.

A ruling on a motion to dismiss a claim pursuant to Rule 12(b)(6), SCRCP, must be based solely on the allegations set forth on the face of the complaint. The motion will not be sustained if the facts alleged and the inferences reasonably deducible therefrom would entitle the plaintiff to relief on any theory of the case. Washington v. Lexington County Jail, 337 S.C. 400, 404, 523 S.E.2d 204, 206 (Ct.App.1999); McCormick v. England, 328 S.C. 627, 632-33, 494 S.E.2d 431, 433 (Ct.App.1997). "[A] judgment on the pleadings is considered to be a drastic procedure by our courts." Russell v. City of Columbia, 305 S.C. 86, 89, 406 S.E.2d 338, 339 (1991). Therefore, pleadings in a case should be construed liberally and the trial court and this Court must presume all well pled facts to be true so that substantial justice is done between the parties. See Justice v. Pantry, 330 S.C. 37, 42, 496 S.E.2d 871, 874 (Ct.App.1998). "The cause of action should not be struck merely because the court doubts the plaintiff will prevail in the action." McCormick, 328 S.C. at 633, 494 S.E.2d at 434. South Carolina only recently recognized the tort of intentional interference with prospective contractual relations in Crandall Corp. v. Navistar Int'l Transp. Corp., 302 S.C. 265, 395 S.E.2d 179 (1990). The elements of the cause of action are (1) the intentional interference with the plaintiff's potential contractual relations, (2) for an improper purpose or by improper methods, and (3) causing injury to the plaintiff. Brown v. Stewart, 348 S.C. 33, 55, 557 S.E.2d 676, 688 (Ct.App.2001); Love v. Gamble, 316 S.C. 203, 214, 448 S.E.2d 876, 882 (Ct.App.1994).⁴ "As an alternative to establishing an improper purpose, the plaintiff may prove the defendant's method of interference was improper under the circumstances." Crandall, 302 S.C. at 266,395 S.E.2d at 180. Generally, there can be no finding of intentional interference with prospective contractual relations if there is no evidence to suggest any purpose or motive by the defendant other than the proper pursuit of its own contractual rights with a third party. Southern Contracting, Inc. v. H.C. Brown Constr. Co., 317 S.C. 95, 102, 450 S.E.2d 602, 606 (Ct.App.1994).

Upon a review of our limited South Carolina precedent, a cause of action for intentional interference with prospective contractual relations generally stands following the loss of an identifiable contract or expectation. See, e.g., Crandall, 302 S.C. at 267-68, 395 S.E.2d at 180-81 (alleged interference with a verbal parts and labor supply contract); Love, 316 S.C. at 205-07,448 S.E.2d at 877-78 (alleged interference with pickle supply contract); Williams v. Riedman, 339 S.C. 251, 529 S.E.2d 28 (Ct.App.2000) (asserted as a counterclaim by employer in a wrongful termination case where the former employee allegedly solicited the employer's current clients); Edens & Avant Inv. Props., Inc. v. Amerada Hess Corp., 318 S.C. 134, 456 S.E.2d 406 (Ct.App.1995) (alleging interference with an option contract; nevertheless, the action is dismissed because plaintiff has no right to recover damages); Southern Contracting, 317 S.C. at 96-97,450 S.E.2d at 603-04 (alleged interference with a subcontracting agreement); Gailliard v. Fleet Mortgage Corp., 880 F.Supp. 1085 (D.S.C.1995) (alleged interference with a mortgage contract dismissed by summary judgment motion). That is, "Crandall and other authority discussing this tort usually require the aggrieved party to have been unsuccessful in acquiring an expected contract due to a third party's intentional and wrongful actions." Egrets Pointe Townhouses Prop. Owners Ass'n v. Fairfield Cmtys., Inc., 870 F.Supp. 110, 116 (1994).

The plaintiff must actually demonstrate, at the outset, that he had a truly prospective (or potential) contract with a third party. This does not require plaintiff to prove the tort in his initial pleadings; rather, the allegations must present facts that give rise to some reasonable expectation of benefits from the alleged lost contracts. This requirement mirrors the analysis of other jurisdictions.

In New Jersey, "[w]hat is actionable is the luring away, by devious, improper and unrighteous means, of the customer of another." Printing Martr-Morristown v. Sharp Elecs. Corp., 116 N.J. 739, 563 A.2d 31, 36 (1989). "A complaint based on...