Walnut Street v. Brokerage Concepts, Inc.

• Decision Date: 22 September 2009
• Docket Number: DOCKET NO. A-5501-06T2
• Citation: 982 A.2d 94,2009 PA Super 191
• Parties: WALNUT STREET ASSOCIATES, INC., v. BROKERAGE CONCEPTS, INC. and Kimberly Macrone, Appeal of Brokerage Concepts, Inc.
• Court: Pennsylvania Superior Court

982 A.2d 94

2009 PA Super 191

WALNUT STREET ASSOCIATES, INC., v. BROKERAGE CONCEPTS, INC. and Kimberly Macrone Appeal of Brokerage Concepts, Inc.

DOCKET NO. A-5501-06T2

Superior Court of Pennsylvania.

Argued February 25, 2009.

Filed September 22, 2009.

A. Richard Feldman, Philadelphia, for appellant.

Steven E. Angstreich, Philadelphia, for appellee.

BEFORE: ORIE MELVIN, BOWES and DONOHUE, JJ.

OPINION BY DONOHUE, J.:

¶ 1 Appellant, Brokerage Concepts, Inc. ("BCI"), appeals from the October 31, 2007 order denying its post-trial motions for judgment notwithstanding the verdict or a new trial and entering judgment in favor of Appellee, Walnut Street Associates, Inc. ("Walnut Street"). After careful review we conclude that in accordance with the Restatement (Second) of Torts § 772(a), true statements may not be the basis for a claim of intentional interference with contractual relationships. Accordingly, we reverse and remand for entry of judgment notwithstanding the verdict in favor of BCI.

¶ 2 The relevant facts and procedural history of this case are as follows. Walnut Street provides insurance brokerage services and assists employers in obtaining health insurance benefits for their employees. In the 1980's, Walnut Street was appointed broker of record for Procacci Brothers Sales Corp. ("Procacci"), a self-funded insurer with separate plans for its union and non-union employees. In 1994, at the recommendation of Walnut Street, Procacci retained BCI, a third-party administrator ("TPA") of self-funded employee benefit plans, as TPA for its two self-funded plans. BCI, in turn, paid Walnut Street commissions based on the premiums paid by the Procacci plans.

¶ 3 On March 1, 2005, after BCI refused to meet a proposal to lower its costs, Procacci notified BCI that as of March 16, 2005, it was moving its union plan from BCI to a new and less costly TPA, Loomis Company ("Loomis"). On March 2, 2005, Kimberly Macrone ("Macrone"), a sales representative employed by BCI, wrote a letter to Procacci asking that it reconsider its decision. Among other things, Macrone's letter informed Procacci of the amount of commission Walnut Street earned on the nonunion plan. Shortly thereafter, Procacci terminated Walnut Street as its broker of record. On March 10, 2005, BCI stopped payment on a commission check to Walnut Street.

¶ 4 In August 2005, Walnut Street commenced the action underlying this appeal against BCI and Macrone. The complaint contained four counts. The first three sought recovery from BCI for unpaid commissions, while the fourth alleged tortious interference with contractual relations. In November 2006, after BCI paid the disputed commissions, plus interest, the trial court granted summary judgment on Counts I, II and III. Summary judgment on Count IV was denied. The parties proceeded to a jury trial on the tortious interference claim. At the close of evidence, Walnut Street entered a voluntary non-suit with respect to Macrone. On June 29, 2007, the jury entered a verdict in favor of Walnut Street and awarded it $330,000 in compensatory damages. BCI filed post-trial motions for judgment notwithstanding the verdict ("JNOV") or in the alternative, a new trial. The trial court denied both motions, and entered judgment in favor of Walnut Street and against BCI.

¶ 5 On appeal, BCI raises the following two issues and sub-issues:

I. Whether the trial court should have directed a judgment in [BCI's] favor because:

A. the statements in BCI's letter to Procacci causing [Walnut Street's] termination were true, and therefore could not serve as the basis for a tortious interference claim under Pennsylvania law, or, in the alternative, under the law of New Jersey, which has the most significant relationship to this issue;¹

B. the imposition of tortious interference liability for the making of truthful statements is unconstitutional under the First Amendment and the Pennsylvania Constitution, where no countervailing state interests have been identified;

C. BCI's conduct was privileged either under the competition privilege or under the business interest privilege; or

D. [Walnut Street] provided no evidence of lost profits but only of lost revenues, and the revenue evidence itself was so insufficient as to render the damages claim purely speculative, with the result that [Walnut Street] failed to prove an essential element of his claim?

II. Whether the trial court should have granted BCI's motion for a new trial because of prejudicial error with respect to one or more of six jury instructions, as follows:

A. the failure to give a charge that a plaintiff cannot ground his cause of action upon his own fraud;

B. the failure to instruct the jury on the meaning of "wrongful means," an essential element of BCI's competition privilege defense;

C. the similar failure to define the term "proper means," essential to BCI's business interest privilege defense;

D. the giving of an erroneous charge to the jury defining lost profits as consisting solely of lost revenues, without regard to the need to subtract out the costs of producing those revenues;

E. the failure to instruct the jury that damages for lost profits must be proved to a reasonable certainty and cannot be speculative; or

F. the failure to instruct the jury that truthful statements cannot be the basis for tortious interference liability?

Appellant's Brief at 3-4.

¶ 6 Under our applicable standard of review, we will reverse a trial court's denial of a motion for JNOV or a new trial only if we find an abuse of discretion or an error of law that controlled the outcome of the case. Hutchinson v. Penske Truck Leasing Co., 876 A.2d 978, 984 (Pa.Super.2005), affirmed, 592 Pa. 38, 922 A.2d 890 (2007). When, as here, the issue raised on appeal presents a question of law, our standard of review is de novo and our scope of review is plenary. See Dooner v. DiDonato, ___ Pa. ___, 971 A.2d 1187, 1193 (2009).

¶ 7 In its first claim on appeal, BCI argues that the trial court erred in denying its post-trial motion for JNOV because the allegedly interfering statements made to Procacci were truthful and thus may not serve as a basis for a claim for tortious interference with contractual relationships. Appellant's Brief at 19. For the reasons that follow, we agree and reverse the trial court's order.

¶ 8 The tort of intentional interference with existing contractual relationships is governed by section 766 of the Restatement (Second) of Torts, which our Supreme Court adopted in Adler, Barish, Daniels, Levin & Creskoff v. Epstein, 482 Pa. 416, 393 A.2d 1175 (1978), appeal dismissed and cert. denied, 442 U.S. 907, 99 S.Ct. 2817, 61 L.Ed.2d 272 (1979).² Section 766 provides as follows One who intentionally and improperly interferes with the performance of a contract (except a contract to marry) between another and a third person by inducing or otherwise causing the third person not to perform the contract, is subject to liability to the other for the pecuniary loss resulting to the other from the failure of the third person to perform the contract.

Rest. 2d Torts § 766 (1979); see also York Group v. Yorktowne Caskets, Inc., 924 A.2d 1234, 1249-50 (Pa.Super.2007); Reading Radio, Inc. v. Fink, et al., 833 A.2d 199, 211 (Pa.Super.2003), appeal denied, 577 Pa. 723, 847 A.2d 1287 (2004); Triffin v. Janssen, 426 Pa.Super. 57, 626 A.2d 571, 574 (1993), appeal denied, 536 Pa. 646, 639 A.2d 32 (1994). The necessary elements of the cause of action are (1) the existence of a contractual relationship between the complainant and a third party; (2) an intent on the part of the defendant to harm the plaintiff by interfering with that contractual relationship; (3) the absence of privilege or justification on the part of the defendant; and (4) the occasioning of actual damage as a result of defendant's conduct. Phillips v. Selig, 959 A.2d 420, 429 (Pa.Super.2008), appeal denied, 600 Pa. 764, 967 A.2d 960 (2009); Small v. Juniata College, 452 Pa.Super. 410, 682 A.2d 350, 354 (1996), appeal denied, 689 A.2d 235 (1997); Triffin, 626 A.2d at 574.

¶ 9 The record on appeal in this case contains sufficient evidence to support the jury's findings with regard to the first, second, and fourth elements of the tort, and our focus here is on the third element (absence of privilege or justification). The third element requires proof that the defendant's actions were improper under the circumstances presented, which is generally determined through consideration of the factors listed in Restatement (Second) of Torts section 767:

In determining whether an actor's conduct in intentionally interfering with a contract ... is improper or not, consideration is given to the following factors: (a) the nature of the actor's conduct; (b) the actor's motive; (c) the interests of the others with which the actor's conduct interferes; (d) the interests sought to be advanced by the actor; (e) the social interests in protecting the freedom of action of the actor and the contractual interests of the other; (f) the proximity or remoteness of the actor's conduct to the interference; and (g) the relations between the parties.

Restatement (Second) of Torts § 767 (1979); see, e.g., Adler Barish, 482 Pa. at 433, 393 A.2d at 1184; Phillips, 959 A.2d at 429-30; Triffin, 626 A.2d at 574. Comment b to section 767 makes clear that under certain circumstances, "the conduct should be permitted without liability, despite its effect of harm to another," and thus the decision "depends upon a judgment and choice of values in each situation." Restatement (Second) of Torts § 767 cmt. b (1979).

¶ 10 In addition to the analysis of the factors listed in section 767, sections 768 through 773 of the Restatement (Second) set forth specific circumstances in which interference with contractual relationships is not improper.³ Relevant to this case is section 772, including in particular subsection 772(a):

One who intentionally causes a third person not to...