John M. Mason v. Wal-Mart Stores, Inc.

John M. MASON v. WAL-MART STORES, INC.

96-1351                                            ___ S.W.2d ___

                    Supreme Court of Arkansas
                Opinion delivered April 30, 1998



1.   Contracts -- tortious interference with contractual
     relationship -- proof required. -- The supreme court stated
     that for a interference to be actionable, it must be improper;
     to determine whether an actor's conduct in intentionally
     interfering with a contract or a prospective contractual
     relation of another 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
     other 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.

2.   Contracts -- tortious interference with contractual
     relationship -- Restatement (Second) of Torts,  766 requires
     showing of improper conduct by defendant. -- The Restatement
     (Second) of Torts,  766, provides that one who intentionally and
     improperly interferes with the performance of a contract
     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; as in Restatement  766, Arkansas law
     requires that the conduct of the defendant be at least
     "improper," and the court looks to factors such as those
     stated in  767 to determine whether the defendant's conduct
     fits that description.

3.   Torts -- improper conduct alleged -- none found. --
     Appellant's suggestion of impropriety, which was that
     appellee's intention was to increase its profits by
     eliminating manufacturer's representatives from its purchasing
     process, was without merit; the supreme court disagreed with
     appellant's argument that comment c of the Restatement (Second)
     of Torts following  767 was applicable; to hold that the
     evidence presented required that a jury evaluate appellee's
     conduct in accordance with the explanation contained in
     comment c would require it in any instance when a business
     threatens not to buy in order to get a better price; there was
     nothing in the evidence presented by appellant that was
     indicative of improper conduct on the part of appellee; the
     case was affirmed.


     Appeal from Crittenden Circuit Court; Ralph Wilson, Jr.,
Judge; affirmed.
     Slaon, Rubens & Peeples, by:  Kent J. Rubens; Glover & Glover,
by:  Mac Glover; and Timothy O. Dudley, for appelant.
     Williams & Anderson, by:  Peter G. Kumpe, Leon Holmes, and
Katherine R. Cloud, for appellees.

     David Newbern, Justice.
     John M. Mason appeals from a summary judgment awarded to Wal-
Mart Stores, Inc. ("Wal-Mart"), on Mr. Mason's claim for tortious
interference with a contractual relationship and business
expectancy.  We affirm the judgment because the evidence presented
by Mr. Mason did not demonstrate that Wal-Mart's conduct was
improper.  
     Mr. Mason worked as an independent sales representative for
three vendors who sold products to Wal-Mart for resale.  Century
Products Company ("Century"), Okla Homer Smith Furniture
Manufacturing Company ("Okla Homer"), and Pentech International,
Inc. ("Pentech"), each had an account with Wal-Mart, and Mr. Mason,
on a purely at-will basis, served as their sales representative to
Wal-Mart.
     For more than a decade, Wal-Mart exhibited discontent with
dealing with independent manufacturers' representatives like Mr.
Mason.  On November 6, 1991, David Glass, Wal-Mart president and
CEO, issued a letter to some, if not all, of its vendors expressing
Wal-Mart's preference for dealing directly with "principals" of the
vendors.  
     The letter, which was reported in a major article in The Wall
Street Journal, mentioned the rapid growth of Wal-Mart and the
desirability on the part of Wal-Mart and its suppliers to be able
to forecast each otherþs needs and to react quickly.  It mentioned
new computer systems by which Wal-Mart shared information with its
vendors, and it referred to the extra reaction time created by
dealing through a third party in addition to the "high risk of
misunderstandings" inherent in the system using independent
representatives.    
     The letter defined a "principal" as "an employee of your
company empowered to make decisions and act in your behalf." 
Excluded were individuals claiming "to be a `principal' of one or
more other companies."  The letter concluded by stating that the
vendor would be "contacted" later to learn whether it agreed to
accept Wal-Mart's "decision that it is in the best interest of our
company and our customers to deal directly with the principals of
your company."
     Shortly after Wal-Mart issued that letter, Century, Okla Homer
Smith, and Pentech removed Mr. Mason from their Wal-Mart accounts,
and Century and Pentech hired new persons to handle the Wal-Mart
account "in house."  Mr. Smith at Okla Homer dealt with Wal-Mart
himself, as he said he had always done, even while Mr. Mason was
working for him.  Mr. Mason was not terminated by Century; rather,
he was kept on there, but he dealt with other accounts.  He was
terminated by Pentech because his only role there had been to
assist on the Wal-Mart account.  Mr. Mason ultimately ceased
working for all three vendors.
     Mr. Mason sued Wal-Mart, alleging that he had a contract with
Century and Okla Homer to act as their representative to Wal-Mart. 
Those contracts, he alleged, were in effect from July 1967 through
the early part of 1992.  He also alleged that he had a contract
with Pentech from August 1980 to December 1991.  Mr. Mason alleged
that he was paid a commission by those vendors on the sales of
their products to Wal-Mart and that, in light of his highly
regarded performance, his contractual relationships could
reasonably have been expected to continue.
     The interference with his contractual relationships and
business expectancies was described as Wal-Mart's use of its
economic power to coerce Mr. Mason's employers to terminate his
contracts with them.  The complaint referred to Mr. Glass's letter
and mentioned an incident that allegedly occurred in 1982 when a
Wal-Mart employee asked Century to terminate its relationship with
Mr. Mason and pass on to Wal-Mart any savings thus achieved.
     In its motion for summary judgment, Wal-Mart asserted that
"the undisputed facts demonstrate that Wal-Mart did not improperly
interfere with Mason's contractual relationships and did not induce
Century, Okla Homer Smith or Pentech to breach any contract with
Mason.  Moreover, Wal-Mart's conduct was privileged."
     The Trial Court granted Wal-Mart's motion, holding that Mr.
Mason "cannot present proof of improper interference as required in
an intentional interference with a contractual relationship claim"
and that, "when a party cannot present proof on an essential
element of its claim, there is no remaining genuine issue of
material fact thereby entitling the party moving for summary
judgment to a judgment as a matter of law."  The Trial Court said
that an interference in a contractual relationship must be
"improper" in order to be "actionable."
     The Trial Court relied on factors listed in the Restatement
(Second) of Torts  767, and on Conoco Inc. v. Inman Oil Co., Inc.,
774 F.2d 895 (8th Cir. 1985), an opinion discussing  767, to
determine whether Wal-Mart's actions could be viewed as "improper
interference."  The Trial Court conceded that "economic pressure
can constitute improper conduct," but it said that Wal-Mart's
conduct did "not amount to improper, actionable conduct under the
elements required for an intentional interference with a
contractual relationship claim."  The Trial Court said that
"competitive conduct which is neither illegal nor independently
actionable does not become actionable because it interferes with
another's contractual relations," citing Amerinet, Inc. v. Xerox
Corp., 972 F.2d 1483, 1507 (8th Cir. 1992).
     The Trial Court addressed the alleged 1982 incident, saying
that, even if testimony about that conversation could be admitted
at trial, it was "insufficient to establish a prima facie case of
improper conduct on the part of Wal-Mart."  Thus, the Trial Court
concluded that Mr. Mason could not "establish a prima facie case of
intentional interference with a contractual relationship claim
against Wal-Mart."  Wal-Mart's privilege claim was not addressed.
     Mr. Mason argues first that the Trial Court "improperly
imposed an element of proof on Mason which the law does not
require"--namely, the requirement to prove that the alleged
interference by the defendant was "improper" or "wrongful." 
Secondly, he contends that, even if impropriety or wrongfulness is
an element of his claim, summary judgment was inappropriate because
he adduced sufficient evidence of improper or wrongful conduct on
Wal-Mart's part to create a genuine issue of material fact.  Ark.
R. Civ. P. 56(c).

                1. The "impropriety" requirement
     To understand our conclusion that it is necessary for the
plaintiff in an interference-with-contract claim to demonstrate
that the conduct of the defendant was at least improper, it is
helpful to consider the tort's modern history in the law of this
State.  It begins with Mason v. Funderburk, 247 Ark. 521, 446 S.W.2d 543 (1969), in which a sales manager for a company selling
books to schools alleged that members and administrators of a
school board wrongfully caused him to lose his job by defaming him. 
Obviously, the defamatory conduct alleged was tortious in itself. 
We reversed a summary judgment that had been awarded against some
of the defendants.  In the course of the opinion, we referred to
the misconduct alleged as malicious, wilful, without legal
justification, without privilege, and tortious.  Thus, we clearly
contemplated that a plaintiff alleging interference with a contract
establish that the defendant did something wrongful or improper. 
In Elliott v. Elliott, 252 Ark. 966, 482 S.W.2d 123 (1972), we
affirmed a directed verdict with respect to a claim of interference
with a land-sale contract, citing the Mason case and pointing out
that the interference was required to be with malice.  
     In Stebbins & Roberts, Inc. v. Halsey, 265 Ark. 903, 582 S.W.2d 266 (1979), we adopted a new approach.  Mr. Halsey had been
a paint salesman for Stebbins & Roberts, Inc. ("Stebbins").  He
took a similar position with PPG Company.  It was alleged that,
despite a covenant in his contract with Stebbins not to compete for
one year, he began calling on his former Stebbins customers.  A
Stebbins employee called PPG, informed it of the anti-competition
agreement, and announced he planned to sue Mr. Halsey, make an
example of him, and "name" PPG in the process.  Mr. Halsey was
fired by PPG, so he sued Stebbins for interference with his
contract.  In holding that Stebbins was not entitled to a directed
verdict, we adopted the view expressed in Prosser on Torts (4th ed.
1971), that, once Mr. Halsey had shown a "wrongful" interference
with his contract, Stebbins would be required to show that its
conduct was "privileged," thus shifting to the defendant the burden
of going forward with the evidence.
     In the case of Walt Bennett Ford, Inc. v. Pulaski Co. Spec.
Sch. Dist., 274 Ark. 208, 624 S.W.2d 426 (1981), Walt Bennett Ford
("Bennett") and the Jim Nabors Company ("Nabors") each bid on
school buses to be purchased by the school district.  Nabors
prevailed, and Bennett sued members of the school board, claiming
they had "maliciously and willfully interfered" with its business
expectancy.  We held that, by awarding the contract to the low
bidder, Nabors, the school board members had protected the tax
payers' interest and had not acted in bad faith.  In a supplemental
opinion denying rehearing, we wrote:

     The general rule is that an improper motive or bad faith
     is no longer an essential part of the plaintiff's case in
     the tort of interference with existing contractual
     relations.  However, the defendant may show that his
     interference was privileged.  Stebbins & Roberts, Inc. v.
     Halsey, 265 Ark. 903, 582 S.W.2d 266 (1979). . . .  Our
     rule announced in Stebbins, supra, that bad faith is no
     longer an essential part of the plaintiff's case in the
     tort of interference with contractual relations is in no
     manner modified or varied by our original opinion. 

Id. at 214A-214B, 624 S.W.2d   at 429-30.
     Our opinions in the Walt Bennett Ford case are cited in
connection with a discussion in Prosser and Keeton on Torts  129, at
pp. 983-84 and n. 61 and 62 (5th ed. 1984).  Unlike the 1971
version of the Prosser text, the later edition states:

          It has always been agreed that a defendant might
     intentionally interfere with the plaintiff's interests
     without liability if there were good grounds for the
     interference, or in other words that some kind of
     unacceptable purpose was required in addition to the
     intent.  Different formulas to express this idea have
     been in use at different stages in the development of the
     tort, the first of which was to say that there was
     liability for intentional interference that was
     "malicious."  It has long been clear, however, that
     "malice" in the sense of ill-will or spite is not
     required for liability.  In recognition of this, courts
     and writers adopted a second formula under which
     liability was imposed for any intentional interference
     that resulted in harm.  Under this formula, the plaintiff
     made out a prima facie case upon proof of intended
     interference plus damages, and it was left to the
     defendant to shoulder if he could the burden of proving
     he was justified in his actions, for example, by showing
     that he acted to protect legitimate and prior property or
     contract interests of his own.  This formula subjected
     the defendant to liability without first describing to
     him what was forbidden and what was permitted, and it
     added to this injury by putting the burden upon him to
     justify his conduct without specifying in any precise way
     what would amount to such a justification.  The
     Restatement Second of Torts has adopted a third formula,
     which may meet a part of this objection.  Under this, the
     defendant is subject to liability for a knowing or
     purposeful interference with contract only if the
     defendant's action was "improper," either as to means or
     purpose.  This formula might be read, as some of the
     cases imply, to put the burden on the plaintiff in the
     first instance to show impropriety, and it is no doubt an
     improvement when so read.  But the Second Restatement
     refused to take a clear position on the point and other
     cases have left the burden upon the defendant to justify
     his conduct.

Id. at pp. 983-84 (emphasis supplied.)
     Although our discussion in the Walt Bennett Ford opinion did
not mention the Restatement's position, Prosser cites the case in
connection with his assertion that "other cases have left the
burden upon the defendant to justify his conduct."  Prosser, supra,
p. 984 n.62.  In describing the case, he points out that this Court
"first held for defendants on the ground that there was no bad
faith, then on supplemental opinion, reaffirmed its earlier rule
that bad faith was no part of the plaintiff's case."
     Some of our later cases have mentioned that "bad faith" is not
a requirement, see, e.g., L.L. Cole & Son Inc. v. Hickman, 282 Ark.
6, 8-9, 665 S.W.2d 278, 280 (1984), and have stated the elements as
we did in the Walt Bennett Ford case as follows:


     (1) [T]he existence of a valid contractual relationship or
     business expectancy; (2) knowledge of the relationship or
     expectancy on the part of the interferor; (3) intentional
     interference inducing or causing a breach or termination of
     the relationship or expectancy; and (4) resultant damage to
     the party whose relationship or expectancy has been disrupted.

274 Ark. at 214, 624 S.W.2d   at 429.  These elements are consistent
with the ones found in Arkansas Model Jury Instructions, Civil, 
406 (Supp. 1995), in Chapter 4, entitled "Willful and Wanton
Conduct, Outrage, and Deceit."  
     In Kinco, Inc. v. Schueck Steel, Inc., 283 Ark. 72, 671 S.W.2d 178 (1984), however, we seemed to require a showing of improper
conduct beyond the earlier-stated elements that now appear in AMI
406.  Schueck Steel, Inc. ("Schueck") was to furnish Walcon brand
metal wall panels in the construction of a public school building
for a set price, including a set profit, negotiated with the
architects.  Richardson Construction Co. was awarded the contract
to erect the walls, and it subcontracted the work with Kinco, Inc.
("Kinco").  Kinco, without informing Schueck, became a distributor
for another brand of wall panels, thus becoming Shueck's
competitor, and used its knowledge of Shueck's prices to underbid
Shueck.  Schueck prevailed at trial, and Kinco contended on appeal
that it should have had a directed verdict.  We held that Shueck's
evidence was sufficient to support the judgment.  We recited the
elements of the tort of interference with a business expectancy
substantially as above, but in our discussion of whether the
evidence was sufficient we did not limit ourselves to those
elements, or even discuss them, but dwelt solely upon the evidence
of Kinco's misconduct.  We then moved on to the second point, which
was Kinco's apparent contention that, even if the elements were
proven, it was entitled to a directed verdict as its action was
privileged because, as with the school directors in the Walt
Bennett Ford case, Kinco was trying to protect the public interest. 
We rejected that argument, but we did so not on the basis of
evaluating the asserted privilege; rather, we again discussed
Kinco's misconduct, by enriching itself by "devious and improper
means."   238 Ark. at 77, 671 S.W.2d   at 1811.
     In United-Bilt Homes v. Sampson, 310 Ark. 47, 51, 832 S.W.2d 502, 503 (1992), we seemingly reverted to defining the tort as
imposing liability upon one þwho intentionally and with malice
interferes with the contractual relations with another."  In
addition, however, to citing the 1971 edition of Prosser on Torts, we
also cited the 1984 edition of Prosser and Keeton on Torts and mentioned
the possibility of "justification" for the alleged tortfeasor's
action.  See also Cross v. Arkansas Livestock & Poultry Comm'n, 328
Ark. 255, 262, 943 S.W.2d 230, 234 (1997)(citing the United-Bilt
Homes case for the statement the actor must act with "malice").
     In Fisher v. Jones, 311 Ark. 450, 844 S.W.2d 954 (1993), the
facts were that J.D. Fisher sold his Mercedes-Benz franchise to
Kelly Hill and others.  Mr. Hill contracted to sell the franchise
to Gerald Jones.  Mr. Hill's group owed Mercedes-Benz Credit Corp.
("MBCC") $600,000.  MBCC seized the inventory of the dealership. 
Mr. Fisher claimed that MBCC had thus interfered in his right of
first refusal to repurchase the franchise from Mr. Hill.  In
holding that a summary judgment in favor of MBCC was appropriate,
we noted that Mr. Fisher had no contract giving him a right to
repurchase the franchise and that MBCC had a right to protect its
interest in the inventory.  We stated:

          For an interference to be actionable, it must be
     improper.  Walt Bennett Ford v. Pulaski County Special Sch.
     Dist. ... (supplemental opinion on denial of rehearing).  The
     Restatement (Second) of Torts sets out the factors in
     determining when interference is improper as follows:
               Factors in Determining Whether Interference is
          Improper. 
               In determining whether an actor's conduct in
          intentionally interfering with a contract or a pro-
          spective contractual relation of another 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 other 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.

311 Ark. at 458-59, 844 S.W.2d   at 959.
     The reference to the supplemental opinion in the Walt Bennett
Ford case is puzzling because it was in that opinion that we
declared that "the general rule is that an improper motive or bad
faith is no longer an essential part of the plaintiff's case in the
tort of interference with existing contractual relations."  Our
holding there seemed to be that the conduct of the school board
members was not actionable because it was privileged because it was
done in good faith.
     In Hunt v. Riley, 322 Ark. 453, 909 S.W.2d 329 (1995), we
affirmed the dismissal of a complaint for failure to state facts
upon which relief could be granted.  Ark. R. Civ. P. 12(b)(6).  As
a deficiency in the complaint, we recited, "Nor does the complaint
allege . . . that the defendants' actions were in any way
improper."  322 Ark. at 459, 909 S.W.2d   at 332.
     If anything is clear from this recitation of our cases, it is
that, in the Stebbins & Roberts case we adopted the 1971 Prosser
procedure, later memorialized in AMI 406, in which a plaintiff who
had shown certain elements could establish a claim for interference
with a contract or business expectancy and that it then became
incumbent upon the defendant to show that the interference was
somehow privileged, without knowing what might constitute such a
privilege.  That is the procedure that Professor Dan B. Dobbs
referred to as a "sorry state of affairs" in Dan B. Dobbs, Tortious
Interference with Contractual Relationships, 34 Ark. L. Rev. 335, 345
(1980).      
     Just as our cases seem to have reverted to requiring an
allegation, or, at the summary-judgment stage, a showing of
"improper" conduct on the part of the defendant, the Restatement
(Second) of Torts,  766, now provides:

     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.
     [Emphasis supplied.]

Professor Dobbs considers this reversion to placing the burden on
the plaintiff as an improvement, but he remains critical of the
Restatement (Second) rule because of the indefiniteness of the term
"improper."  While we understand the sentiment that the tort should
be reduced to situations in which a third party may be held liable
for interference only when the alleged conduct is independently
tortious as it was in Mason v. Funderburk, supra, we are unwilling
to go that far.  Cf. Conoco, Inc. v. Inman Oil Col, Inc., 774 F.2d 895, 907 (8th Cir. 1985)("We think that `wrongful means' in this
context refers to means which are intrinsically wrongful -- that
is, conduct which is itself capable of forming the basis for
liability of the actor.")  Our review of our cases leads us to the
position that, as Restatement  766, our law requires that the
conduct of the defendant be at least "improper," and we look to
factors such as those stated in  767 to determine whether the
defendant's conduct fits that description.

                    2. Wal-Mart's conduct   
     Mr. Mason's argument does not end with the suggestion that the
Trial Court erred in including the requirement that Wal-Mart be
shown to have interfered improperly in his contracts or business
expectancies.  He argues that, even if that is a requirement, the
evidence he presented shows that Wal-Mart's conduct was indeed
improper.  The only suggestion of impropriety, however, is that
Wal-Mart's intention was to increase its profits by eliminating
manufacturer's representatives from its purchasing process.  When
questioned about whether the economic ends sought to be furthered
by Wal-Mart were improper, Mr. Mason's counsel referred to Comment
c of the Restatement (Second) of Torts following  767.  It reads as
follows:

          Economic pressure.  Economic pressure of various types is
     a common means of inducing persons not to deal with another,
     as when A refuses to deal with B if B enters into or continues
     a relation with C, or when A increases his prices to B or
     induces D not to deal with B on the same condition.  Or the
     pressure may consist of the refusal to admit B to membership
     into a trade association or a professional organization, as a
     medical or legal association.  The question whether this
     pressure is proper is answered in the light of the
     circumstances in which it is exerted, the object sought to be
     accomplished by the actor, the degree of coercion involved,
     the extent of the harm that it threatens, the effect upon the
     neutral parties drawn into the situation, the effects upon
     competition, and the general reasonableness and
     appropriateness of this pressure as a means of accomplishing
     the actor's objective.

     Although Mr. Mason uses the term "greed" to describe Wal-
Mart's objective, the term "profit motive" could have been
substituted.  To hold that the evidence presented in this case
requires that a jury evaluate Wal-Mart's conduct in accordance with
the explanation contained in comment c to  767 would require it in
any instance when a business threatens not to buy in order to get
a better price.  In short, we see nothing in the evidence presented
by Mr. Mason that we could consider to be indicative of improper
conduct on the part of Wal-Mart.
     Affirmed. 

     Corbin, J., did not participate in the decision of this case.
     Special Justice Lynn Williams joins in this opinion.
     Arnold, C.J., and Glaze, J., dissent.