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

State: arkansas

Issuer: Arkansas Supreme Court

Document:

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,