Employment. Town not liable for tortious iterference with Town treasurer’s contract.

 Stone v. Irasburg, Town of 2014 VT 43 (25-Apr-2014)

CRAWFORD, J. Plaintiff Linda Stone sued the Town of Irasburg alleging tortious interference with office. The trial court granted the Town summary judgment. Plaintiff appealed. We affirm.

Tortious interference generally refers to interference with performance of an existing contract or a prospective contractual relationship. See Restatement (Second) of Torts § 766 (2013). Under this tort, a person is liable if he “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.” Id.

While plaintiff styles her claim as one for “tortious interference with performance of office,” there is no such enumerated tort in our case law, or in the law of other jurisdictions. The closest analogy, although imperfect, is tortious interference in the employment context, which has been recognized in some states. While the elements are described by courts in various ways, under any definition of this tort, the interference with the contract or prospective advantage must come from a third party.

Here, to the extent that we can apply tortious interference with an employment relationship to plaintiff’s allegation of tortious interference with performance of her office, we conclude that plaintiff has failed to meet the elements of that tort. Plaintiff alleges that selectboard members interfered with plaintiff’s performance of her duties as treasurer. Because the selectboard members are agents of the Town and not third parties, plaintiff has failed to allege interference by a third party, and has not pled a prima facie case for tortious interference.

Therefore, the court was correct to grant judgment to the Town on this count.

****
Note: Vermont precedent not cited in this opnion says the tort of interference with contract is applicable in limited situations against other employees or officers of the plaintiff's employer who act outside the scope of their employment to further their own interests. Murray v. St. Michael's College, 667 A.2d 294, 164 Vt. 205 (1995) (summary judgment in favor of supervisor appropriate in the absence of any allegation by plaintiff that supervisor acted outside the scope of his employment or in his own personal interest in dealing with plaintiff); Lyon v. Bennington College Corp., 137 Vt. 135, 138-39, 400 A.2d 1010, 1012-13 (1979) (claim against officers of college for inducing college to break its contract with plaintiff presented viable tort claim because the gravamen of the complaint was that the individual defendants acted in their individual capacities, and was not an attempt to impose liability for good faith acts within the scope of corporate duties). See generally Annotation, Liability of Corporate Director, Officer, or Employee for Tortious Interference with Corporation's Contract with Another, 72 A.L.R. 4th 492 (1989) (stating circumstances in which courts have allowed plaintiffs to bring contractual interference suits against other employees of plaintiffs' employer); Restatement (Second) of Torts § 767 (1979) (stating circumstances in which courts have allowed plaintiffs to bring contractual interference suits against other employees of plaintiffs' employer); Restatement (Second) of Torts § 767 (1979) (stating factors for court's consideration in determining whether defendants' actions are "improper" so as to make defendants liable under contractual interference claim); e.g. Shea v. Emmanuel College, 425 Mass. 761, 682 N.E.2d 1348 (1997), (court properly granted summary judgment against terminated college employee's interference of contract action against her former supervisor because employee failed to create genuine issue of material fact as to whether former supervisor had acted with actual malice in arranging for her discharge); Hickman v. Winston County Hosp. Bd., 508 So.2d 237 (Ala.1987), (courts have held that claim of tortious interference with former employee's contract of employment cannot be maintained against officers or employees of a corporation unless those persons were acting outside their scope of employment and were acting with actual malice); Murray v. Bridgeport Hosp., 40 Conn.Supp. 56, 480 A.2d 610 (1984),(although an agent acting legitimately within the scope of agent's authority cannot be held liable for interfering with or inducing principal to breach a contract between principal and a third party, an agent can be held liable for such interference or inducement if agent did not act legitimately within the agent's scope of duty but used the corporate power improperly for personal gain); Holloway v. Skinner, 898 S.W.2d 793 (Tex.1995), (on an interference with contract claim a plaintiff must show that the officer of a corporation defendant acted in a fashion so contrary to the corporation's best interests that the officer's actions could only have been motivated by personal interests).

Stealing customers by insider is both breach of fiduciary duty and interference with business relations worthy of punitive damages:

J.A. Morrissey, Inc. v. Smejkal, 2010 VT 66 (Johnson, J.)
This case arises from the demise of a business relationship within a construction company. Defendants appeal from the partial denial of their post-trial motion for judgment as a matter of law, or in the alternative, for a new trial, following a jury verdict in favor of plaintiffs in an action for breach of fiduciary duty, interference with business relations, and fraudulent conveyance. On appeal, defendants first assert that the evidence did not support the jury’s conclusion that Smejkal breached his fiduciary duties. Second, defendants challenge the jury’s verdict with respect to interference with prospective business relationships. Third, defendants argue that the fraudulent conveyance finding was erroneous. Finally, defendants assert that punitive damages were not properly assessed against Smejkal because there was insufficient evidence of malice. We affirm.

Smejkal owed a fiduciary duty to JAM in his role as vice-president and corporate director of the company. This duty imposed an obligation upon Smejkal to act with the utmost good faith and loyalty for the best interests of JAM. Officers and directors have been found to have breached their fiduciary duties when, while still employed by the company, they solicit the business of a single customer before leaving the company, or use the company’s facilities or equipment to assist them in developing their new business . A corporation’s fiduciary is not permitted to take advantage of business opportunities which are considered to belong to the corporation as far as the fiduciary is concerned.. Based on the evidence the jury could have concluded that Smejkal abused his position and intentionally failed to inform JAM about the Johnson estimate because he wanted to usurp the project for himself, thereby breaching his fiduciary duties to JAM.

To prevail on a claim for interference with prospective business relationships, a plaintiff must show: (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. Gifford v. Sun Data, Inc., 165 Vt. 611, 613 n.2, 686 A.2d 472, 474 n.2 (1996). A plaintiff must show that the interferer acted with the purpose to harm the plaintiff or by means that are dishonest, unfair, or improper. Id. at 613, 686 A.2d at 474-75. Competitive business practices are not proscribed under the tort unless those practices are criminal or fraudulent. Id. at 613, 686 A.2d at 475; see Restatement (Second) of Torts § 768(1) (1979) (competition does not rise to level of improper interference if “actor does not employ wrongful means”). Based on the evidence, it was reasonable for the jury to infer that Smejkal wrongfully used his position as a trusted, high-ranking JAM employee to sabotage JAM and then usurp Paluska as a client for his new company. The jury could also have inferred that Smejkal knew that the Johnson estimate would generate work for JAM and then chose not to tell anyone at JAM about the estimate or his work on the project because he wanted to perform work for Johnson himself and for his own benefit. Indeed, the facts show that Smejkal abused his position of trust at JAM to surreptitiously obtain work for himself.

An award of punitive damages requires a showing of: (1) wrongful conduct that is outrageously reprehensible; and (2) malice. Fly Fish Vt., Inc. v. Chapin Hill Estates, Inc., 2010 VT 33, ¶ 18. Malice is “defined variously as bad motive, ill will, personal spite or hatred, reckless disregard, and the like.” Id. Malice may be found where one seeks to profit, through conduct that is deliberate and outrageous, at the expense of another. DeYoung v. Ruggierio, 2009 VT 9, ¶ 27, 185 Vt. 267, 971 A.2d 627 (“[M]alice may arise from deliberate and outrageous conduct aimed at securing financial gain or some other advantage at another’s expense, even if the motivation underlying the outrageous conduct is to benefit oneself rather than harm another.”). Compare Villeneuve v. Beane, 2007 VT 75, ¶ 10, 182 Vt. 575, 933 A.2d 1139 (mem.) (concluding that landlord’s conduct in unlawfully evicting tenants was “intentional, unlawful, criminal in nature, and outrageous” and justified punitive damages) with Monahan v. GMAC Mortgage Corp., 2005 VT 110, ¶¶ 53, 60, 179 Vt. 167, 893 A.2d 298 (concluding that “conduct that does not involve a deliberate decision by the promisor to breach, falls far short of the punitive damages standard” and that conduct evidencing breach of covenant of good faith and fair dealing which consisted “mainly of inaction” did not “indicate the personal ill will, or evidence the bad motive associated with malice”).

We conclude that the evidence presented here is sufficient to support the jury’s assessment of punitive damages against Smejkal because the jury could have found that Smejkal “harbored ill will, and actual malice towards JAM, and intentionally desired, and took concrete actions to steer economic benefits to himself and away from JAM.” In light of the relationship between the parties and the trust that was placed in Smejkal as an important member of a small company, his actions meet the standard of intentional and sufficiently wrongful conduct necessary to sustain punitive damages. The jury could have properly found that Smejkal’s conduct—which included a concerted effort to sabotage JAM’s professional relationship with longstanding clients and to siphon off those clients for his own financial benefit—demonstrated actual malice towards JAM.