Opinion ID: 1615348
Heading Depth: 2
Heading Rank: 1

Heading: Existence of a business expectancy

Text: For its first point on appeal, Guaranty argues that, as a matter of law, Abstract did not possess a valid business expectancy. Specifically, Guaranty contends that no contract existed between Abstract and third-party real estate companies and their agents. Additionally, Guaranty argues that Abstract's past dealings with customers would not entitle it to a future right of referrals from past customers. In response, Abstract argues that Guaranty bought business away from other competitors by devising kickback marketing with the full knowledge that these schemes violated the law. Specifically, Abstract maintains that substantial evidence of valid economic expectations was presented to the jury, including testimony from many realtors who described ongoing business relationships with Abstract. Our standard of review of the denial of a motion for directed verdict is whether the jury's verdict is supported by substantial evidence. Ethyl Corp. v. Johnson, 345 Ark. 476, 49 S.W.3d 644 (2001). Similarly, in reviewing the denial of a motion for JNOV, we will reverse only if there is no substantial evidence to support the jury's verdict and the moving party is entitled to judgment as a matter of law. Id. Substantial evidence is that which goes beyond suspicion or conjecture and is sufficient to compel a conclusion one way or the other. Id. It is not this court's place to try issues of fact; rather, this court simply reviews the record for substantial evidence to support the jury's verdict. Id. In determining whether there is substantial evidence, we view the evidence and all reasonable inferences arising therefrom in the light most favorable to the party on whose behalf judgment was entered. Id. With this standard of review in mind, we turn to the applicable law. In Arkansas, we have recognized the tort of interference with business expectancy. W.E. Long Co. v. Holsum Baking Co., 307 Ark. 345, 820 S.W.2d 440 (1991). In Mason v. Funderburk, 247 Ark. 521, 528, 446 S.W.2d 543, 548 (1969), we gave a historical perspective of tortious interference with business expectancy, where we stated: Intentional and unjustified third-party interference with valid . . . business expectancies constitutes a tort, with its taproot embedded in early decisions in the courts of England . . . [T]he tort has become engraved upon American law, generally unsullied in principle . . . The fundamental premise of the tortthat a person has a right to pursue his valid . . . business expectancies unmolested by the wrongful and officious intermeddling of a third partyhas been crystallized and defined in Restatement, Torts Sec. 766. Mason, 247 Ark. at 528, 446 S.W.2d at 548. To establish a claim of tortious interference with business expectancy, Abstract must prove: (1) the existence of a valid contractual relationship or a business expectancy; (2) knowledge of the relationship or expectancy on the part of the interfering party; (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. Vowell v. Fairfield Bay Community Club, Inc., 346 Ark. 270, 276-77, 58 S.W.3d 324, 329 (2001). In addition to the above requirements, we have stated that for an interference to be actionable, it must be improper. Hunt v. Riley, 322 Ark. 453, 909 S.W.2d 329 (1995). Further, we note that tortious interference with business expectancy is distinguishable from the privilege to compete, which is discussed by Prosser in the following terms: In short, it is no tort to beat a business rival to prospective customers. Thus, in the absence of prohibition by statute, illegitimate means, or some other unlawful element, a defendant seeking to increase his own business may cut rates or prices, allow discounts or rebates, enter into secret negotiations behind the plaintiff's back, refuse to deal with him or threaten to discharge employees who do, or even refuse to deal with third parties unless they cease dealing with the plaintiff, all without incurring liability. Kinco, Inc. v. Schueck Steel, Inc., 283 Ark. 72, 77-78, 671 S.W.2d 178, 181 (1984) (citing W. Prosser, Law of Torts, § 130 (3rd ed.1971)) (emphasis added). Guaranty raises the first element of the tort for its first point on appeal: whether a valid contractual relationship or a business expectancy existed. This first element may be proved by demonstrating either a valid contractual relationship or a business expectancy. Cross v. Arkansas Livestock and Poultry Commission, 328 Ark. 255, 262, 943 S.W.2d 230, 234 (1997). We note that this element is in the disjunctive by the use of the word or ; that is, a valid contractual relationship or a business expectancy must exist. We further note that no contract between Abstract and third-party realtors was introduced into evidence. Thus, the question is whether Abstract had a valid business expectancy with which Guaranty interfered. In Arkansas, the existence of a contractual relationship is not a prerequisite to maintain an action for tortious interference with business expectancy. Mid-South Beverages, Inc. v. Forrest City Grocery Co., Inc., 300 Ark. 204, 778 S.W.2d 218 (1989). In Mid-South Beverages , we reversed the trial court's dismissal of the complaint, and held that no contractual relationship must exist between the two parties. In reviewing the complaint, we noted that (1) Mid-South had an exclusive agreement with Pepsico to bottle and distribute its beverages in a certain geographic territory; (2) Forrest City Grocery (FCG) had sold and distributed Pepsi within Mid-South's territory; (3) Mid-South's customers were being induced to sever their business relationships with Mid-South and instead make purchases from FCG, causing loss of business to Mid-South; and (4) FCG acted wilfully, knowing its acts interfered with Mid-South's contractual relationships and with its customers. We held that the complaint sufficiently stated a cause of action, and that no contractual relationship had to exist between these parties. Id. Further, we held that there was substantial evidence to support a valid business expectancy in Vowell, supra . In Vowell , the Fairfield Bay Community Club had an agreement with its property owners to provide services and amenities in exchange for a fee. Vowell, a competitor who had extensive knowledge of the Club's practices, as he was a former employee of the Club, began soliciting nonresident Club members to participate in a competing vacation resort. We held that the Club had a valid business expectancy to a stream of dues to be paid with respect to lots purchased by the Club, and given that Vowell previously worked for the club and helped draft deed restrictions for club properties, we held that there was substantial evidence that he intentionally developed a marketing plan to entice club members to sell lots to the competitor. Id.; see also Holsum, supra (holding that Holsum Baking had a business expectancy with its suppliers because (1) it had been doing business with them for years and (2) the appellant instructed Holsum's suppliers to stop selling Holsum's trademark packaging); Kinco, Inc. v. Schueck Steel, Inc., 283 Ark. 72, 671 S.W.2d 178 (1984) supra (holding that there was substantial evidence that Kinco interfered with Schueck's valid business expectancy of supplying metal wall paneling for construction of a school). Thus, in examining the question of whether a valid business expectancy exists, we must look to Prosser for guidance on the definition of business expectancy. Prosser writes: For the most part the expectancies thus protected have been those of future contractual relations, such as the prospect of obtaining employment, or employees, or the opportunity of obtaining customers. In such cases, there is a background of business experience on the basis of which it is possible to estimate with some fair amount of success both the value of what has been lost and the likelihood that the plaintiff would have received it if the defendant had not interfered. . . . The cause of action has run parallel to that for interference with existing contracts. Again, the tort began with malice, and it has remained very largely a matter of at least intent to interfere. . . . With intent to interfere as the usual basis of the action, the cases have turned almost entirely upon the defendant's motive or purpose, and the means by which he has sought to accomplish it. W. Page Keeton et al., Prosser & Keeton on the Law of Torts § 130, at 1006-1009 (5th ed.1984) (emphasis added). We are also guided by the Restatement (Second) of Torts, which provides in pertinent part: The relations protected against intentional interference by the rule stated in this Section include any prospective contractual relations, . . . if the potential contract would be of pecuniary value to the plaintiff. Included are interferences with the prospect of obtaining employment or employees, the opportunity of selling or buying land or chattels or services, and any other relations leading to potentially profitable contracts, . . . Also included is interference with a continuing business or other customary relationship not amounting to a formal contract. Restatement (Second) of Torts § 766B, cmt. c (1979). Any prospective business relationship that would be of pecuniary value constitutes a valid business expectancy. Id. We have said that some precise business expectancy or contractual relationship must be obstructed. Country Corner Food and Drug, Inc. v. First State Bank and Trust Co., 332 Ark. 645, 966 S.W.2d 894 (1998). In that case, Country Corner alleged in its complaint that the Bank tortiously interfered with its contract advantage by giving assurances and refusing to renew a loan. We held that Country Corner's cause of action was insufficiently pled in the complaint because the appellant failed to indicate with what contract or with what business expectancy the Bank intended to interfere. Id. With these well-established legal principles in mind, we turn to the present case. First, we look to the complaint to determine if Abstract specifically pleaded that a valid business expectancy existed. Conclusions without the necessary factual underpinnings to support them are not enough to state a cause of action. Hunt, 322 Ark. at 459, 909 S.W.2d at 332. Here, in its complaint, Abstract made the following allegations involving Guaranty's interference: [T]he illegal acts which are alleged in this complaint constitute interferences with contractual relationships and business expectancies which were held by the plaintiff and which were well known to the defendants, as through honest and fair competition in the economic market over many years, the plaintiff was established in that economic market and held valid, existing economic relationships and justifiable economic expectations, the destruction of which was the intentional and improper motive of the defendants, and the fact the defendants' conduct alleged herein is illegal under the Real Estate Settlement Procedures Act [12 U.S.C. Section 2601, et seq. ] is evidence of impropriety required under Mason v. Wal-Mart Stores, Inc., 333 Ark. 3, 969 S.W.2d 160 (1998) and as proof, among other things, of the defendants' motive, the illegality of the defendants' activity sought to be advanced, and the absence of a social interest in protecting the defendants' freedom to pursue illegal activities, all considerations required to be assessed under Mason v. Wal-Mart Stores, Inc ., and under AMI 404, Arkansas Model Jury Instructions (4th ed.1999). Based upon the foregoing allegations, it appears that Abstract sufficiently pleaded that a valid business expectancy existed. Abstract averred that it maintained valid, existing economic relationships and justifiable economic expectations, with which Guaranty interfered. Additionally, Abstract averred that there were illegal actsacts that did not justify the interference. Those alleged illegal acts to which Abstract refers in its complaint include (1) Guaranty making donations at the directive of Roddy McCaskill; (2) paying the salaries of employees who provided their services as closing coordinators to real estate brokerage firms, paying bonuses to those employees, depending on how many referrals of closing services could be steered to STAR, and keeping their customers ignorant of STAR's higher closing costs; (3) alleged kickback schemes through shell corporations made with Real Estate Central, Roddy McCaskill and Truman Ball, Jeff Fuller, Val Hansen, and Rainey Realty; and (4) funding the alleged kickback schemes called marketing agreements with Rainey Realty and Real Estate Central by establishing rental agreements that allegedly disguised methods of providing funds in exchange for referrals. Second, there was substantial evidence to support the jury's verdict. Abstract's allegations regarding the existence of a valid business expectancy were supported by numerous witnesses who testified at trial. Billy Roehrenbeck, a licensed title insurance agent and employee with Abstract, testified that he reviewed numerous Abstract files dating from March 2002 to determine which real estates companies were involved in the closing and whether there was a split closing. Mr. Roehrenbeck prepared Exhibit 5, which shows transactions for Real Estate Central, Rector Phillips Morse, and Rainey, and he testified that these are long, long, long term relationships and you see a drop, you know, just like that. Mr. Roehrenbeck further testified that the business with the realty companies stopped almost overnight. Additionally, Mr. Roehrenbeck testified that in his review of 552 closures at Rainey Realty, there was above $35,000.00 assessed in additional title insurance premiums above what American Abstract would have charged. He further stated that eighty-eight percent (88%) of the buyers and sellers that went through Rainey and were referred to Stewart had a higher title insurance premium than if they had closed with American Abstract. He further testified about his concern about the loss of business that Abstract was experiencing. Mike Sage, an escrow officer and vice-president of STAR, testified that the realtors control anywhere between fifty percent (50%) to ninety percent (90%) of where the business scatters. Jim Pender testified about the title insurance business as a relationship business, and Kay Marris, a closing agent for Standard Abstract and Title Company, testified about the importance of developing relationships with real estate brokers with whom she deals routinely. Additionally, Barbara Swesey, a real estate broker with Adkins, McNeill, Smith, and Associates, testified that she's worked primarily with Abstract for twenty-five years. Finally, Mr. Bob Adkins, the chief executive officer of Abstract, testified that he knew he was losing business from Rainey, Rector Phillips Morse, and Real Estate Central. He testified: I knew something was going on. I didn't know exactly what it was, of course, in the business, you hear things. But it was predicated by American Abstract starting to lose business from three realtors that we have named which is Rainey, RPM, and Real Estate Central. Knowing that was happening, and I knew that something was going on that we were losing business for that reason, specifically, I did not know all of the marketing agreements, the TitleMax program, I did not know what specifically they were. Guaranty suggests that the first element of the tortwhether there is a valid business expectancyis a threshold issue that must be answered before we delve into the remaining elements. However, based upon the holdings in our case law, particularly in Mid-South Beverages, supra , Vowell, supra , Holsum, supra , and Kinco, supra , as well as the definitions of business expectancy outlined by Prosser and the Restatement (Second) of Torts, we look to the four elements of the tort in their totality to answer the question whether tortious interference with business expectancy should lie. Further, we note that this issue does not come to us on a 12(b)(6) or summary-judgment appeal where we typically examine matters of law. In determining whether substantial evidence exists, we have stated that we will rely upon two crucial principles to avoid invading the province of the jury. Unum Life Ins. Co. of America v. Edwards, 362 Ark. 624, 210 S.W.3d 84 (2005) (citing Wheeler Motor Co. v. Roth, 315 Ark. 318, 867 S.W.2d 446 (1993)). First, the court will consider only the evidence favorable to the successful party below. Second, the court will defer to the jury's resolution of the issue unless we can say that there is no reasonable probability to support the version of the successful party below. Id. In the present case, the circuit court properly ruled that the question of whether a valid business expectancy existed was a question for the jury to determine, and we cannot say that the circuit court erred in deferring to the jury's resolution of the issue. See, e.g., Gill v. Delaware Park, LLC, 294 F.Supp.2d 638 (D.Del.2003); Ernster v. Ralston Purina Co., 740 F.Supp. 724 (E.D.Mo.1990). Moreover, based upon the foregoing testimony, we conclude that there was substantial evidence to support the jury's verdict on the issue of whether Abstract's business expectancy existed.