Wal-Mart Stores Inc. v. Sturges

• Decision Date: 20 September 2001
• Docket Number: No. 98-1107,98-1107
• Citation: 52 S.W.3d 711,44 Tex. Sup. Ct. J. 486
• Parties: (Tex. 2001) Wal-Mart Stores, Inc., et al., Petitioners v. Harry W. Sturges, III, et al., Respondents
• Court: Texas Supreme Court

Page 711

52 S.W.3d 711 (Tex. 2001)

Wal-Mart Stores, Inc., et al., Petitioners v. Harry W. Sturges, III, et al., Respondents

No. 98-1107

Supreme Court of Texas.

Argued January 19, 2000.

Decided March 8, 2000.

Rehearing Overruled September 20, 2001.

On Petition for Review from the Court of Appeals for the Ninth District of Texas

Justice Hecht delivered the opinion of the Court, in which Chief Justice Phillips, Justice Enoch, Justice Owen, and Justice Abbott joined, and in Parts I, IV and V of which Justice Hankinson and Justice O'Neill joined.

Texas, like most states, has long recognized a tort cause of action for interference with a prospective contractual or business relation even though the core concept of liability -- what conduct is prohibited -- has never been clearly defined. Texas courts have variously stated that a defendant may be liable for conduct that is "wrongful", "malicious", "improper", of "no useful purpose", "below the behavior of fair men similarly situated", or done "with the purpose of harming the plaintiff", but not for conduct that is "competitive", "privileged", or "justified", even if intended to harm the plaintiff. Repetition of these abstractions in the case law has not imbued them with content or made them more useful, and tensions among them, which exist not only in Texas law but American law generally, have for decades been the subject of considerable critical commentary.

This case affords us the opportunity to bring a measure of clarity to this body of law. From the history of the tort in Texas and elsewhere, and from the scholarly efforts to analyze its boundaries, we conclude that to establish liability for interference with a prospective contractual or business relation the plaintiff must prove that it was harmed by the defendant's conduct that was either independently tortious or unlawful. By "independently tortious" we mean conduct that would violate some other recognized tort duty. We must explain this at greater length, but by way of example, a defendant who threatened a customer with bodily harm if he did business with the plaintiff would be liable for interference because his conduct toward the customer -- assault -- was independently tortious, while a defendant who competed legally for the customer's business would not be liable for interference. Thus defined, an action for interference with a prospective contractual or business relation provides a remedy for injurious conduct that other tort actions might not reach (in the example above, the plaintiff could not sue for assault), but only for conduct that is already recognized to be wrongful under the common law or by statute.

Because the defendant's conduct in this case was not independently tortious or unlawful, and because the defendant did not breach its contract, we reverse the court of appeals' judgment¹ and render judgment for the defendant.

I

Plaintiff Harry W. Sturges, III contracted for himself and plaintiffs Dick Ford, Bruce Whitehead, and J. D. Martin, III to purchase from Bank One, Texas a vacant parcel of commercial property in Nederland, Texas, referred to as Tract 2. The contract, dated December 29, 1989, gave purchasers the right to terminate if within sixty days they were unable to lease the property and "to secure the written approval of Wal-Mart Corporation to the intended use of the Property, in accordance with the right so given to Wal-Mart pursuant to certain restrictions on the Property." The right referred to was the right to approve modifications in a site plan for the property that Wal-Mart Stores, Inc. and Wal-Mart Properties, Inc. (collectively, "Wal-Mart") held under two recorded instruments, each entitled "Easements with Covenants and Restrictions Affecting Land" ("ECRs"), one filed in 1982 and the other in 1988. The purpose of the ECRs was to assure the commercial development of Tract 2 and an adjacent tract, Tract 1, according to a prescribed plan.

The 1982 ECR was between Wal-Mart, which owned Tract 2 at the time, and the State Teachers Retirement System of Ohio ("OTR"), which owned Tract 1, having acquired it from Wal-Mart under a sale and leaseback agreement. OTR leased Tract 1 to Wal-Mart to use for a store. In 1984, Wal-Mart sold Tract 2 to a joint venture that included a partnership, Gulf Coast Investment Group. Gulf Coast later acquired Tract 2 from the joint venture. The 1988 ECR, made by Gulf Coast, OTR, and Wal-Mart, modified the site plan for the tracts and otherwise incorporated the terms of the 1982 ECR.

Gulf Coast's efforts to develop Tract 2 failed, and in 1989 Bank One acquired the property by foreclosure. Two of Gulf Coast's partners, plaintiffs Whitehead and Martin, along with two other investors, plaintiffs Sturges and Ford, continued to look for a way to develop the property. When Sturges learned that Fleming Foods of Texas, Inc. was interested in building a food store in the area, he contracted with Bank One to purchase Tract 2 for the plaintiffs in hopes of leasing the property to Fleming Foods.

As soon as the agreement with Bank One was executed, Sturges contacted Wal-Mart to request a modification of the 1982/1988 ECRs to permit construction on Tract 2 of a food store to Fleming's specifications. A modification was necessary in part because Fleming wanted to construct a 51,000-square-foot store, and the site plan permitted only a 36,000-square-foot structure. A manager in Wal-Mart's property management department, DeLee Wood, told Sturges to submit a revised site plan, and though she did not have authority to approve the modification herself, she indicated to Sturges that Wal-Mart would approve it. About the same time, Sturges obtained from Fleming a non-binding memorandum of understanding that it would lease Tract 2.

Unbeknownst to Wood, a manager in another Wal-Mart department, Sandra Watson, had been evaluating the possibilities for expanding stores at various locations, including the Nederland store. If a store could not be expanded, Watson's assignment was to consider relocating the store. In July 1989 Watson hired a realtor, Tom Hudson, to help Wal-Mart acquire Tract 2 for purposes of expansion. When Hudson learned of Sturges's contract with Bank One, he suggested to Watson that Wal-Mart could thwart Sturges's efforts to purchase the property by refusing to approve the requested modification of the 1982/1988 ECRs. At the time, neither Watson nor Hudson knew of Wood's conversations with Sturges.

When Wood's and Watson's conflicting activities came to the attention of the head of Wal-Mart's property management department, Tony Fuller, he agreed with Watson that Wal-Mart should try to acquire Tract 2 and told Wood to deny Sturges's request to modify the ECR, which she did in a letter to Sturges without explanation. Fuller then instructed Hudson to contact Fleming and communicate Wal-Mart's desire to expand onto Tract 2. Hudson complied, telling L. G. Callaway, Fleming's manager of store development who had been working on the deal with Sturges, that if Wal-Mart could not acquire Tract 2, it would close its store on Tract 1 and relocate. Since Fleming was not interested in Tract 2 without a Wal-Mart store next door, Callaway took Hudson's call to be an ultimatum not to move forward on the proposed lease with Sturges. Consequently, Fleming canceled its letter of intent with Sturges, and the plaintiffs opted out of their contract with Bank One. Several months later, Wal-Mart purchased Tract 2 and expanded its store.

The plaintiffs sued Wal-Mart for tortiously interfering with their prospective lease with Fleming and for breaching the 1982/1988 ECRs by unreasonably refusing to approve the requested site plan modification. The plaintiffs' actual damages claim under both theories was the same -- the profits the plaintiffs would have made on the Fleming lease. The jury found Wal-Mart liable on both theories. Concerning the plaintiffs' interference claim, the district court submitted to the jury two questions with accompanying instructions as follows:

Did Wal-Mart wrongfully interfere with Plaintiffs' prospective contractual agreement to lease the property to Fleming?

Wrongful interference occurred if (a) there was a reasonable probability that Plaintiffs would have entered into the contractual relation, and (b) Wal-Mart intentionally prevented the contractual relation from occurring with the purpose of harming Plaintiffs.

Was Wal-Mart's intentional interference with Plaintiffs' prospective lease agreement with Fleming justified?

An interference is "justified" if a party possesses an interest in the subject matter equal or superior to that of the other party, or if it results from the good faith exercise of a party's rights, or the good faith exercise of a party's mistaken belief of its rights.

The jury answered "yes" to the first question and "no" to the second. Wal-Mart offered no objection to this part of the jury charge that is relevant to our consideration of the case. The jury assessed $1 million actual damages on the contract claim and on the interference claim, assessed $500,000 punitive damages on the interference claim, and found that reasonable attorney fees for each side were $145,000. At the plaintiffs' election, the trial court rendered judgment on the interference claim, awarding actual and punitive damages but not attorney fees.

All parties appealed. The court of appeals affirmed the award of actual damages but remanded for a retrial of punitive damages, holding that the trial court had improperly excluded evidence offered by the plaintiffs during the punitive damages phase of the trial.²

We granted Wal-Mart's petition for review.³

II

Wal-Mart argues that there is no evidence to support the jury's verdict that it wrongfully interfered with the plaintiffs' prospective lease with Fleming or that it was not justified in acting as it did. Our analysis of these arguments is complicated because it must be made in light of the jury...