Tuesday, April 8, 2008

Indiana Appellate Cases: Third Party Interfering With Contracts

On March 20th, the Indiana Court of Appeals handed down its opinion in Allison v. Union Hospital (PDF format) that dealt with tortious interference with contractual relationship against Union Hospital and Wabash Valley Anesthesia, P.C. (the other appellee) and constructive fraud and breach of the duty of good faith and fair dealing against Union.

Allison (and Safford, the other appellant) lost on both claims at the trial court level and had a split decision with the Court of Appeals. The Court of Appeals reversed the trial court on the tortious interference claim but upheld the other claims.

The opinion contains a refresher on the tort's elements:

A plaintiff alleging tortious interference with a contractual relationship must establish five elements: (I) the existence of a valid and enforceable contract: (2) the defendant's knowledge of the existence of the contract; (3) the defendant's intentional inducement of the breach of the contract; (4) the absence of justification; and (5) damages resulting from the defendant's wrongful inducement of the breach. (citation omitted).
This case focuses on the justification element. The Indiana Supreme Court has set out the following factors for judging whether or not the defendant acted with justification:
(a) the nature of the defendant's conduct;
(b) the defendant's motive;
(c) the interests of the plaintiff with which the defendant's conduct interferes;
(d) the interests sought to be advanced by the defendant;
(e) the social interests in protecting the freedom of action of the defendant and the contractual interests of the plaintiff;
(f) the proximate or remoteness of the defendant's conduct to the interference: and
(g) the relations between the parties.
The Indiana Court of Appeals proceeded to evaluate the facts of the case against these guidelines. It then made the following decision:
In weighing all of these factors, we find this to be a very close call. And as noted above, the ultimate question relating to the justification of the defendant's conduct is whether that conduct has been fair and reasonable under the circurnstances. We find this inquiry to he so highly- fact sensitive that we conclude it is best answered by a factfinder. Although it is possible that under certain circumstances this question may lie answered as a matter of law-and, indeed, we make just such a finding with respect to WVA below- we do not find that to be the case with respect to Union, based primarily on its conduct with respect to the without cause termination provision....
I must say this case has some unusual features - Union Hospital admitted entering into a contract it had no intention of honoring - which probably helped lead to the decision for a remand for trial rather a decision as a matter of law.

Having confronted several of these tortious interference cases, my thought is that the lack of justification element is generally the make or break element. If the case is a good tortious interference case, then the other elements ought to be readily apparent with an appropriate support of the evidence. (For example, last week a client wrote me about what would appear a good tortious interference case except there was no interference - the clients were not impressed by the attempted interference.) With this opinion, Indiana has a very a good explanation of when a third party lacks justification for its interference.