Gifford v. Sun Data, Inc.

Gifford v. Sun Data, Inc.  (95-037); 165 Vt 611; 686 A.2d 472

[Opinion Filed 6-Aug-1996]

[Motion for Reargument Denied 4-Sep-1996]


                               ENTRY ORDER

                      SUPREME COURT DOCKET NO. 95-037

                             MARCH TERM, 1996


John P. Gifford and                  }     APPEALED FROM:
Total Computer Services, Inc.        }
                                     }
     v.                              }     Windsor Superior Court
                                     }
Sun Data, Inc.                       }
                                     }     DOCKET NO. S417-91-WrC


       In the above-entitled cause, the Clerk will enter:

       After a jury verdict in favor of plaintiff John P. Gifford, defendant
  Sun Data, Inc. moved for judgment notwithstanding verdict on claims of
  tortious interference with a contract and intentional interference with
  prospective contracts.  On appeal, Sun Data claims that the court erred in
  denying its motions, arguing that Gifford failed to meet his evidentiary
  burden. Gifford cross-appeals, claiming that the trial court erred in
  failing to give a requested jury instruction on a broker's right to recover
  a commission, and in failing to instruct the jury on punitive damages.  We
  affirm in part and reverse in part.

       Gifford, through his business, Total Computer Services, Inc.,
  purchased computer equipment for resale from Sun Data, Inc.  Gifford
  identified prospective buyers and received quotes from Sun Data for the
  cost of the equipment a buyer wished to purchase.  Gifford would complete
  the sale, marking up the Sun Data price to achieve his profit.  The parties
  also occasionally negotiated leases of Sun Data equipment with Gifford
  receiving a commission when the lease was finalized.

       To protect his client base, Gifford secured a promise from Dan
  Hendrix, then Vice President of Sun Data, that Sun Data would not solicit,
  or sell directly to, customers Gifford originally acquired.  If Sun Data
  did sell directly to such a customer, Gifford was to be paid a commission.

       By early 1989 the parties' relationship had deteriorated.  Gifford
  claimed he was owed $72,000 in commissions while Sun Data maintained
  Gifford owed it $54,000 for unpaid invoices.  At about the same time,
  Gifford entered into a $20,000 computer sale contract with David McPhaul,
  president of Harrison Publishing Company.  Before McPhaul paid the contract
  price, however, a Sun Data employee called and told him to pay the amount
  plaintiff owed Sun Data on the contract, between $7,000 and $8,000,
  directly to Sun Data.  McPhaul refused, but used the figure Sun Data quoted
  to reduce the price of his contract with Gifford from $20,000 to $10,000.
  Thereafter, Sun Data terminated its relationship with Gifford and ceased
  paying commissions he alleged were owed to him.  Sun Data also began
  selling directly to customers that Gifford had solicited.  Gifford received
  no commissions on these sales.

       After trial the jury awarded Gifford $10,000 for tortious interference
  with a contract, $68,000 for intentional interference with prospective
  contractual relations, and $16,200 for three breach-of-contract claims. 
  The jury also found that Sun Data owed Gifford approximately $62,174 in
  commissions, but offset that amount by $62,729, which it found Gifford owed
  Sun

 

  Data for overdue invoices.

                                     I.

       Sun Data first claims that the trial court erred in denying its
  motions under V.R.C.P. 50 for directed verdict and judgment notwithstanding
  the verdict on the claim of tortious interference with a contract.  To
  establish liability for this tort, Gifford must show that Sun Data
  intentionally and improperly induced Harrison Publishing not to perform its
  contract.  Williams v. Chittenden Trust Co., 145 Vt. 76, 80, 484 A.2d 911,
  913 (1984); see Restatement (Second) of Torts § 766 (1979).

       We first look to the element of intent, which can be proven by showing
  that an actor knew that interference was substantially certain to occur. 
  Williams, 145 Vt. at 81, 484 A.2d  at 914.  In this case Sun Data,
  attempting to bypass Gifford and receive direct payment from his customer,
  revealed his anticipated gross profit on an unconsummated transaction.  It
  naturally follows that a customer armed with such knowledge might try to
  renegotiate a deal in his own favor.   Sun Data cannot plausibly maintain
  that it did not know that revealing price information was likely to disrupt
  Gifford's contract.  The jury could reasonably conclude that Sun Data acted
  with intent.

       Next we look to inducement, which for this tort need not rise to the
  level of coercion, threats or compulsion.  Id. at 82, 484 A.2d  at 914. 
  Rather, the jury may find inducement if defendant's acts caused the
  nonperformance of the contract. Id.  As we noted above, the original terms
  of the contract were not performed in this case.  Under our standard of
  review, this is sufficient evidence of inducement.

       Finally, Sun Data claims that its actions were not improper.  Our
  analysis of this issue is guided by § 767 of the Restatement (Second) of
  Torts (1979),(FN1) which directs us to consider the motives and actions of
  Sun Data, the relations of the parties, and their respective interests.
  Boiled down, Sun Data's argument is that Gifford's accounts were in
  arrears, and therefore Sun Data was entitled to seek payment directly from
  Gifford's customer.  Sun Data had no contractual relationship with this
  customer, and thus no right to seek direct payment.  Sun Data argues that
  it was protecting its own interests, and thus that its actions were
  economically justified.  It failed to explain, however, how depriving
  Gifford of a substantial profit would improve its  ability to collect on
  his overdue accounts.  An actor has no legal right to invade the
  contractual relations of others solely to promote his own financial
  interests.  Williams, 145 Vt.

 

  at 83,  484 A.2d  at 915.  Gifford adequately established that Sun Data's
  actions were improper, and the motions for directed verdict and judgment
  notwithstanding verdict were properly denied. See Foote v. Simmons
  Precision Products Co., 158 Vt. 566, 570, 613 A.2d 1277, 1279 (1992) (in
  reviewing denial of motions for directed verdict and judgment
  notwithstanding verdict, we view evidence in light most favorable to
  nonmoving party and affirm if any evidence fairly supported plaintiff's
  theory).

                                     II.

       Next, Sun Data claims that the court erred in failing to direct a
  verdict, or grant its motion for judgment notwithstanding the verdict, on
  Gifford's claim of tortious interference with prospective contractual
  relations.(FN2)  This tort protects the same interest in stable economic
  relationships as does the tort of interference with contract, but applies
  to business relationships not formally reduced to contract.  Pacific Gas
  and Elec. Co. v. Bear Stearns & Co., 791 P.2d 587, 590 (Cal. 1990).  The
  principal distinction between the two is that a "broader range of privilege
  to interfere is recognized when the relationship or economic advantage is
  only prospective."  Id.

       To prevail on a claim of tortious interference with prospective
  contractual relations, a plaintiff must prove that the defendant interfered
  with business relations existing between the plaintiff and a third party,
  either with the sole purpose of harming the plaintiff or by means that are
  dishonest, unfair, or improper.  PPX Enter's. v. Audio Fidelity Enter's.
  818 F.2d 266, 269 (2d. Cir. 1987).  Competitive business practices are not
  tortious. See Restatement (Second) of Torts § 768 (1979)(FN3) (competition as
  proper or improper influence).  If the defendant's interference is intended
  to advance its own competing interests, the claim will fail unless the
  defendant's methods are criminal or fraudulent.  Id.

 Page 4>


       Here, Gifford relies on the fact that, after their relationship
  terminated, Sun Data made direct sales to customers he had solicited. 
  There is no evidence that Gifford had ongoing business relations with these
  customers other than his testimony that he had tried, and failed, to make
  additional sales to them.  The relationship Gifford describes is too
  speculative to constitute an "existing business relation."

       Gifford conceded that Sun Data was entitled to break off its
  relationship with him, and that he was not able to obtain the type of
  equipment he had purchased from Sun Data through other suppliers.  Far from
  having a realistic "business expectancy,"  Gifford apparently was unable to
  serve his former customers.

       The case he relies on, Monette v. AM-7-7 Baking Co., 929 F.2d 276 (6th
  Cir. 1991), is inapposite.  In Monette, the plaintiff, a bread wholesaler,
  had a reliable daily sales route of consistent customers.  The defendant,
  the plaintiff's wholesale supplier, obtained the plaintiff's customer list
  through deceit.  Thereafter the defendant refused to sell the plaintiff
  inventory and took over the plaintiff's route. Id. at 279.  Here, Gifford
  did not make predictable sales to reliable customers, and there is no
  evidence that Sun Data used deceit to undermine his business.

       Furthermore, Gifford's claim that Sun Data's actions were improper is
  based on its apparent breach of an agreement not to make direct sales to
  his customers unless it paid him a commission.  This agreement, however,
  was never reduced to writing and was referred to by Sun Data as an informal
  arrangement.  A breach of this "arrangement" cannot be said to be criminal
  or fraudulent.  Thus, because Sun Data was acting at least in part to
  advance its interests as a competitor, its actions were not "improper"
  within the meaning of § 768 of the Restatement (Second) of Torts.  See
  Restatement (Second) of Torts § 768 cmt. e. (1979).

       Moreover, at trial Gifford successfully argued that he was owed
  commissions on all sales Sun Data had made to customers he had solicited. 
  He was awarded over $62,000 in compensatory damages.  Thus it appears that
  Gifford has been made whole with respect to any breach of the above
  agreement.  An additional award for tortious interference with prospective
  contractual relations would constitute double recovery.  Sun Data's motions
  for directed verdict and judgment notwithstanding the verdict on the
  tortious interference claim should have been granted.

                                    III.

       One of the largest transactions the parties negotiated was a
  lease/sale agreement with Killington, Ltd.  The lease agreement contained
  an option that enabled Killington to trade in its computer system for a new
  one that was not yet available.  The price of the option, $17,950 per month
  for sixty months, could be increased by adding more months to the term if
  the price of the new system exceeded $500,000.  Gifford was to be paid a
  $20,000 commission if Killington exercised the option.  When Killington
  attempted to do so, however, Sun Data refused to deliver the new system for
  the option price, and proposed a new term of eighty-four months because the
  value of the equipment Killington was to trade in had dropped.  Killington
  rejected the higher price and cancelled the lease agreement on the basis
  that Sun Data had breached it. Gifford tried to collect his commission, but
  Sun Data refused to pay it on the grounds that the deal had not been
  consummated.

       On cross appeal, Gifford claims that the trial court erred in failing
  to instruct the jury that he was entitled to a commission on the Killington
  transaction if Sun Data's conduct caused the

 

  deal to fall through.(FN4)  See Arjay Properties, Inc. v. Hicks, 143 Vt. 335,
  338, 465 A.2d 777, 779 (1983) (where contract not completed due to seller's
  wrongful conduct, broker who produces ready, willing and able buyer is
  nonetheless entitled to commission).  The evidence showed that Sun Data
  altered the terms of the contract after Killington elected to exercise its
  option. Moreover, the commission on the deal was substantial.  Absent the
  instruction, the jury may have concluded that Gifford was not entitled to a
  commission, because the deal was not concluded.  We cannot say that the
  omission was harmless.  Gifford is entitled to a new trial on that issue. 
  See Lorrain v. Ryan, 160 Vt. 202, 209, 628 A.2d 543, 548 (1993) (to prevail
  on appeal from jury instruction, plaintiff must show error in instruction
  resulted in prejudice).

       The award of damages for tortious interference with prospective
  contractual relations is reversed; reversed and remanded for
  reconsideration of Gifford's right to receive a commission on the
  Killington transaction; otherwise, affirmed.




     BY THE COURT:



     _______________________________________
     Frederic W. Allen, Chief Justice

     _______________________________________
     Ernest W. Gibson III, Associate Justice

     _______________________________________
     John A. Dooley, Associate Justice

     _______________________________________
     James L. Morse, Associate Justice

     _______________________________________
     Denise R. Johnson, Associate Justice



  ------------------------------------------------------------------------
                                  Footnotes


FN1.  In determining whether an actor's conduct in intentionally
  interfering with a contract of 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 the 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 relation between the parties.

Restatement (Second) of Torts § 767 (1979).

FN2.  The elements of the tort are as follows: (1) the existence of a
  valid business relationship or expectancy; (2) knowledge by the interferer
  of the relationship or expectancy; (3) an intentional act of interference
  on the part of the interferer; (4) damage to the party whose relationship
  or expectancy was disrupted; and (5) proof that the interference caused the
  harm sustained.  Triple R Indus., Inc. v. Century Lubricating Oils, Inc.,
  912 F.2d 234, 236 (8th Cir. 1990).


FN3.  (1) One who intentionally causes a third person not to enter
  into a prospective contractual relation with another who is his competitor
  or not to continue an existing contract terminable at will does not
  interfere improperly with the other's relation if:

               (a) the relation concerns a matter involved in the competition
                    between the actor and the other and
               (b) the actor does not employ wrongful means, and
               (c) his action does not create or continue an unlawful restraint 
                   of trade, and
               (d) his purpose is at least in part to advance his interest in
                   competing with the other.

       (2) The fact that one is a competitor of another for the business of a
  third person does not prevent his causing a breach of an existing contract
  with the other from being an improper interference if the contract is not
  terminable at will.

  Restatement (Second) of Torts § 768 (1979).

FN4.   Gifford also claims that the court erred in failing to give a
  requested instruction on punitive damages.  After the jury was instructed
  on the law, however, Gifford's only objection was that "the instructions
  should include an instruction to the jury that a party may not avoid
  obligation to pay commission to a broker where the party breaches or
  defaults on the underlying agreement on which the commission is based." 
  Gifford did not object to the lack of a punitive damages instruction thus
  his claim on that issue was not preserved, and we will not consider it. See
  Lorrain v. Ryan, 160 Vt. 202, 207, 628 A.2d 543, 547 (1993) (failure to
  make objection after charge is waiver that precludes raising issue on
  appeal).