Opinion ID: 1695852
Heading Depth: 1
Heading Rank: 3

Heading: Tortious-Interference-with-Business-Relations Claim

Text: W & R argues that UILIC cannot recover on its tortious-interference claim because, it says, UILIC did not prove that W & R was a stranger to the relationships with which W & R allegedly interfered. Because UILIC failed to satisfy its burden of proof as to the stranger element, W & R argues, the trial court erred in denying its motion for a JML as to the tortious-interference claim. UILIC argues that the trial court properly sent its tortious-interference claim to the jury because, it argues, it produced substantial evidence of (1) variable-annuity insurance policies with UILIC policyholders, (2) about which W & R was aware, (3) with which W & R intentionally interfered, (4) resulting in the migration and pirating of thousands of those policies and more than $655 million in lost revenue for UILIC. UILIC also argues that it produced substantial evidence indicating that W & R was not a party to those policies and that it had no lawful control over them, and, therefore, that W & R was a legal stranger to the policies. In Parsons v. Aaron, 849 So.2d 932 (Ala. 2002), we discussed extensively the elements necessary to prove the tort of interference with contractual or business relationships: This Court recently recognized that to establish tortious interference with contractual or business relations a plaintiff must prove: `1) the existence of a contract or business relation; 2) the defendant's knowledge of the contract or business relation; 3) intentional interference by the defendant with the contract or business relation; 4) the absence of justification for the defendant's interference; and 5) damage to the plaintiff as a result of the interference.`  Ex parte Awtrey Realty Co., 827 So.2d 104, 108-09 (Ala.2001), quoting Soap Co. v. Ecolab, Inc., 646 So.2d 1366, 1371 (Ala.1994). Justification has been recognized both as an element to be proved by the plaintiff and as an affirmative defense to be pleaded and proved by the defendant. Compare Awtrey Realty, supra, and Pakruda v. Cross, 669 So.2d 907, 909 (Ala.Civ.App.1995); BellSouth Mobility, Inc. v. Cellulink, Inc., 814 So.2d 203 (Ala.2001). As we noted in BellSouth Mobility, `it is illogical to continue to list an absence of justification as one of the elements of the plaintiff's cause of action and then to place the burden on the defendant to disprove it.` 814 So.2d at 212 n. 5, quoting Century 21 Academy Realty, Inc. v. Breland, 571 So.2d 296, 298 (Ala.1990). We agree with the language quoted in BellSouth Mobility. We reiterate that justification for interference with contractual or business relations is an affirmative defense to be pleaded and proved by the defendant. In addition to the elements recited above, this Court has also recognized: `After proving the existence of a contract, it is essential to a claim of tortious interference with contractual relations that the plaintiff establish that the defendant is a `third party,' i.e., a `stranger' to the contract with which the defendant allegedly interfered. Atlanta Market Ctr. Management Co. v. McLane, 269 Ga. 604, 608, 503 S.E.2d 278, 282 (1998); see also Alcazar Amusement Co. v. Mudd & Colley Amusement Co., 204 Ala. 509, 86 So. 209 (1920). This is so, because a party to a contract cannot, as a matter of law, be liable for tortious interference with the contract. Lolley v. Howell, 504 So.2d 253, 255 (Ala. 1987). `One is not a stranger to the contract just because one is not a party to the contract.... McLane, 269 Ga. at 608, 503 S.E.2d at 282 (emphasis added [in BellSouth Mobility ]). As we recently stated in Colonial Bank v. Patterson, 788 So.2d 134 (Ala.2000): [W]hen tripartite relationships exist and disputes arise between two of the three parties, then a claim alleging interference by the third party that arises from conduct by the third party that is appropriate under its contract with the other two parties is not recognized.`  BellSouth Mobility, 814 So.2d at 212. 849 So.2d at 946-47. Clearly, a party to a contract or a business relationship cannot be liable for tortious interference with that contract or business relationship. Colonial Bank v. Patterson, 788 So.2d 134, 137 (Ala.2000); Ex parte Blue Cross & Blue Shield, Inc., 773 So.2d 475, 480 (Ala.2000). Parsons makes it clear that a plaintiff asserting a tortious-interference claim bears the burden of proving that the defendant is a third party or stranger to the contract or business relationship with which the defendant allegedly interfered. See also BellSouth Mobility, Inc. v. Cellulink, Inc., 814 So.2d 203, 212 (Ala.2001). A defendant is a party in interest to a relationship if the defendant has any beneficial or economic interest in, or control over, that relationship. Parsons, 849 So.2d at 937; BellSouth, 814 So.2d at 214; Colonial Bank, 788 So.2d at 139; Blue Cross, 773 So.2d at 480. In Parsons, we concluded that a father who participated in his son's decisions regarding the son's health-club business was not a stranger to the relationship between the health club and the plaintiff, who had been discharged from his employment with the health club. In BellSouth, we concluded that the plaintiff could not maintain a tortious-interference action in the context of a three-way relationship, where the parties were mutually dependent upon one another, because, in that context, the plaintiff could not establish, as a matter of law, that the defendant was a stranger to the relationship. We held that where a contract would not have been consummated without the participation of a certain party, that party is anything but a stranger to the relationship. 814 So.2d at 214. In reaching our decisions in Parsons and BellSouth, we relied upon Georgia law. See, e.g., Atlanta Market Ctr. Mgmt. Co. v. McLane, 269 Ga. 604, 608, 503 S.E.2d 278, 282 (1998), which this Court embraced in Parsons and BellSouth. In Atlanta Market Center, the Supreme Court of Georgia stated: After proving the existence of a contract, it is essential to a claim of tortious interference with contractual relations that the plaintiff establish that the defendant is a `third party,' i.e., a `stranger' to the contract with which the defendant allegedly interfered. One is not a stranger to the contract just because one is not a party to the contract, as it has been held that the alleged interferer is not a stranger to the contract and thus not liable for tortious interference where the alleged interferer was the agent for one of the parties to the contract of insurance (i.e., the underwriter), and all the purported acts of interference were done within the scope of the interferer's duties as agent. Jet Air v. National Union Fire Ins. Co., 189 Ga. App. 399, 375 S.E.2d 873 (1988). 269 Ga. at 608, 503 S.E.2d at 282. The Court then concluded: In Jefferson-Pilot Comm. Co. v. Phoenix City Broadcasting, 205 Ga.App. 57, 60, 421 S.E.2d 295 (1992), the shadow of liability for tortious interference was further diminished when the Court of Appeals reasoned that `all parties to a comprehensive interwoven set of contracts which provided for the financing, construction, and transfer of ownership' were not strangers, i.e., the purchaser of a radio station was not a stranger to the contractual relations between the radio station's seller and the seller's lenders. Thus, in order for a defendant to be liable for tortious interference with contractual relations, the defendant must be a stranger to both the contract and the business relationship giving rise to and underpinning the contract. 269 Ga. at 609, 503 S.E.2d at 283. W & R insists that it was not a stranger to the business relationships between UILIC and the policyholders, but was instead an integral part of those relationships. But for its efforts in selling and servicing the policies, it says, there would have been no relationship between UILIC and the policyholders. W & R points out that UILIC depended upon W & R's sales force to sell and service its policies, that the policyholders were customers of both UILIC and W & R, and that the policyholders continued to be W & R customers after they purchased UILIC's variable-annuity insurance policies. Clearly, before UILIC terminated the PUA, W & R was not a stranger to the relationships at issue here. The trial court so concluded when it entered the partial summary judgment in favor of W & R as to the portion of UILIC's tortious-interference claim based on acts occurring before April 30, 2001 (the effective date of the termination of the PUA). The propriety of that ruling is not challenged by UILIC. W & R maintains, however, that it continued to be a non-stranger to the relationships after the PUA was terminated. W & R says that it continues to have a vested financial interest in the policyholders' variable-annuity investments and that it also continues to have obligations to service the UILIC variable-annuity insurance policies it has sold. Indeed, the agreement between W & R and SAL acknowledges W & R's authority and obligation to continue servicing those UILIC policies previously sold by W & R and its right to continue to receive commission payments for those investments so long as those policies remain in force. The termination of the PUA, W & R argues, did not suddenly transform W & R into a stranger to the tripartite relationships between UILIC, the policyholders, and W & R. On the other hand, relying on Colonial Bank, UILIC argues that a party to a tripartite relationship is nevertheless a stranger to that relationship where its conduct is not appropriate under its contract with the other two parties. Colonial Bank, 788 So.2d at 138. W & R's mass replacement of UILIC's policies was not appropriate conduct, UILIC insists; therefore, W & R must be considered a stranger to the relationships. In Colonial Bank, however, where we concluded that the bank was acting within its contractual rights in refusing to honor a counter check presented by the plaintiff, this Court meant by appropriate conduct a party has the legal right to take even if the plaintiff objects to the conduct. 788 So.2d at 139. The evidence before us indicates that W & R had the legal right to replace any UILIC policy if the circumstances were appropriate for the policyholder whose policy was replaced. Therefore, UILIC's reliance upon Colonial Bank is misplaced. UILIC also argues that this Court has applied the stranger doctrine to immunize from liability only those nonparties to contracts who had effective control over performance of the contracts at issue. Thus, UILIC contends, the defendant in Parsons was not a stranger to the contract where he routinely acted as the agent of one of the contracting parties and where his conduct was ratified by that party; likewise, the defendant in BellSouth was not liable for tortious interference where its permission was required before the plaintiff could enter into the contractual relationship and where the contract itself defined certain rights and obligations of the defendant. 814 So.2d at 214. UILIC also cites Colonial Bank, 788 So.2d at 138 (the defendant was not a stranger to the contract between the plaintiff and a third party where the defendant's action was authorized by its own contract with the plaintiff and the third party); and Bama Budweiser of Montgomery, Inc. v. Anheuser-Busch, Inc., 611 So.2d 238, 247 (Ala. 1992) (the defendant was not a stranger to the contract where contract performance required the defendant's approval). Although W & R was involved in soliciting applications for UILIC's variable-annuity insurance policies, UILIC argues, W & R did not have the legal and contractual entitlements to participate in the contractual relationship that the defendants in Parsons, BellSouth, Colonial Bank, and Bama Budweiser had. We decline to retreat from our earlier acceptance of precedent from Georgia. We continue to find cases applying Georgia law to be helpful. See Britt/Paulk Ins. Agency, Inc. v. Vandroff Ins. Agency, Inc., 952 F.Supp. 1575 (N.D.Ga.1996), aff'd, 137 F.3d 1356 (11th Cir.1998) (table). In that case, a plaintiff insurance agency had a contract with a second insurance agency to market insurance policies provided by a third-party insurance carrier. Relying upon Georgia law, the United States District Court for the Northern District of Georgia held that the plaintiff insurance agency could not recover against the insurance carrier for tortious interference with the plaintiff's relationships either with its insureds or with the second insurance agency because, as a matter of law, the carrier was not a stranger to those relationships. Even though the carrier was not a party to the contracts at issue, its role as the issuer of the policies made it an inextricable part of the relationship and therefore incapable of tortious interference. 952 F.Supp. at 1585. The court applied a four-part test used by Georgia courts for determining whether a defendant is a stranger to a contract: [A] defendant is not a `stranger' to a contract or business relationship when: (1) the defendant is an essential entity to the purported injured relations; (2) the allegedly injured relations are inextricably a part of or dependent upon the defendant's contractual or business relations; (3) the defendant would benefit economically from the alleged injured relations; or (4) both the defendant and the plaintiff are parties to a comprehensive interwoven set of contracts or relations. Barnwell [v. Barnett & Co.], 222 Ga.App. 694, 476 S.E.2d 1 [(1996)]; Rendenl Inc. v. Liberty Real Estate, Inc. ], 213 Ga.App. 333, 444 S.E.2d 814 [(1994)]; Lake Tightsqueezel Inc. v. Chrysler First Fin. Servs. Corp. ], 210 Ga.App. 178, 435 S.E.2d 486 [(1993)]; Jefferson-Pilot [Comm. Co. v. Phoenix City Broadcasting, Ltd. of Atlanta ], 205 Ga.App. 57, 421 S.E.2d 295 [(1992)]. 952 F.Supp. at 1584. The district court then concluded: The court finds that Britt/Paulk's relationship with Vandroff was an inextricable part of the predominant agency relationship between Northbrook and Vandroff. It is uncontroverted that Britt/Paulk was marketing Northbrook's products. Without Northbrook's insurance to market and sell, the purported contractual and business relations at issue between Vandroff and Britt/Paulk would not have existed. In this instance, Britt/Paulk's contractual and business relations with Vandroff were clearly dependent upon Vandroff's relationship with Northbrook. As Britt/ Paulk representatives have conceded, the equipment dealers program, like other multi-tiered marketing structures, functioned as a series of dependent relationships.... Moreover, absent the existence of the general agency relationship between Vandroff and Northbrook and Northbrook's inland marine insurance products, Britt/Paulk would have had no insurance to market and sell to its sub-producers and insureds. Accordingly, the court holds, as a matter of law, that Northbrook was not a `stranger' to the relationships at issue. 952 F.Supp. at 1586. We also find support in another Georgia decision, LaSonde v. Chase Mortgage Co., 259 Ga.App. 772, 577 S.E.2d 822 (2003), in which the Court of Appeals of Georgia stated: In order to be liable for interference with a contract, a defendant must be a stranger to both the contract and the business relationship giving rise to and underpinning the contract. One is not a stranger to the contract just because he is not a party to the contract. A tortious interference claim requires, among other things, wrongful conduct by the defendant without privilege; `privilege' means legitimate economic interests of the defendant or a legitimate relationship of the defendant to the contract, so that he is not considered a stranger, interloper, or meddler. A person with a direct economic interest in the contract is not a stranger to the contract. Parties to an interwoven contractual arrangement are not liable for tortious interference with any of the contracts or business relationships. It is clear that Chase Mortgage was not a stranger to the sales contract between LaSonde and McGregor. Chase Mortgage held the note and security deed to the property at issue. Indeed, Chase Mortgage was responsible for deciding whether to permit McGregor or LaSonde to assume the loan on the property. Chase Mortgage had a direct economic interest in the property which was the subject of the sales contract. 259 Ga.App. at 773-74, 577 S.E.2d at 824 (emphasis added; footnotes omitted). For the sake of clarity, we adopt the term participant to describe an individual or entity who is not a party, but who is essential, to the allegedly injured relationship and who cannot be described as a stranger. One cannot be guilty of interference with a contract even if one is not a party to the contract so long as one is a participant in a business relationship arising from interwoven contractual arrangements that include the contract. In such an instance, the participant is not a stranger to the business relationship and the interwoven contractual arrangements define the participant's rights and duties with respect to the other individuals or entities in the relationship. If a participant has a legitimate economic interest in and a legitimate relationship to the contract, then the participant enjoys a privilege of becoming involved without being accused of interfering with the contract. We conclude that UILIC's argumentthat one can be considered a stranger to the relationship if one does not effectively control performance under the contractis too narrow. The evidence presented in this case establishes that W & R was never a stranger to the relationships at issue, either before the PUA was terminated on April 30, 2001, or after. Indeed, even after UILIC terminated the PUA and signed a new agreement with SAL, UILIC insisted that W & R execute a limited selling agreement with SAL before paying commissions due W & R on new investments made by policyholders in UILIC variable-annuity insurance policies after the PUA was terminated. In a letter dated May 2, 2001, McWhorter wrote the following to W & R agents on behalf of UILIC: A new Principal Underwriting Agreement with SAL Financial was signed April 25, 2001. SAL determined (and we agree) that NASD [National Association of Securities Dealers] rules require [W & R] to sign a written selling agreement with SAL before SAL can pay [W & R] your commissions on variable policies. W & R did not agree that regulations of the National Association of Securities Dealers required such a contract; nevertheless, it entered into what is entitled a limited selling agreement with SAL on May 16, 2001. That agreement states, in pertinent part: WHEREAS, [W & R] served as the principal underwriter of the Variable Contracts pursuant to a Principal Underwriting Agreement between [W & R] and [UILIC], as amended (the `PUA'), until May 1, 2001, when [SAL] became the principal underwriter for Variable Contracts issued on or after May 1, 2001; and WHEREAS, [W & R] will remain the broker of record for Variable Contracts it sold prior to May 1, 2001, and is owed and will continue to be owed compensation from [UILIC] relating to its sales of Variable Contracts; and .... WHEREAS, in the interests of resolving their dispute, the parties hereto wish to enter into this agreement for the limited purpose of permitting [SAL] to pay to [W & R] compensation due to [W & R] from [UILIC] for the sale by [W & R] of Variable Contracts that are considered by [SAL] to have occurred on or after May 1, 2001. That agreement then authorized W & R to continue to service existing UILIC policyholders and to receive the compensation it was owed from UILIC. The agreement provided that W & R was not authorized to sell any new variable-annuity insurance policies issued by UILIC, except to the extent additional investments in Variable Contracts sold by [W & R] prior to May 1, 2001 are considered to constitute new sales. The agreement also stated that it should not be construed or interpreted to create any third party beneficiaries. Before UILIC gave notice on February 28, 2001, of the termination of the PUA effective April 30, 2001, almost a year after filing this action charging tortious interference, UILIC alleged that W & R was plotting mass replacements of UILIC policies while the PUA was in effect, and it claimed damages for policy replacements that occurred before and after it terminated the PUA. UILIC contends that the termination of the PUA ushered in an era in which W & R became a stranger to the policyholder relationships, if it had not been so before then. Before the termination of the PUA, W & R had ongoing relationships with the UILIC policyholders. Effective May 1, 2001, however, pursuant to the agreement between UILIC and SAL, W & R continued to deal with UILIC's policyholders. The agreement recited that W & R is owed and will continue to be owed compensation from [UILIC]. The termination of the PUA did not usher in a new era in which W & R was reduced to a stranger to the relationships. UILIC was convinced when it contracted with SAL that W & R intended to engage in a systematic mass replacement of its policies. SAL then contracted with W & R, shortly after UILIC's relationship with W & R ended. UILIC's contract with SAL is not contained in the voluminous record in this case. We do not know whether it was then possible for either UILIC to enter into arrangements with SAL to protect itself from the activities thereafter occurring that are the basis for the claims in this action or for SAL to enter into arrangements with W & R calculated to protect UILIC. We do know that W & R's right to compensation survived termination of the PUA or at least is recited in the agreement between SAL and W & R and is not otherwise contradicted. The contract between SAL and W & R is included in the record, and nothing in it protects UILIC from activities UILIC then believed W & R was undertaking and of which UILIC, according to the allegations of its complaint filed on May 3, 2000, had been aware for some time. To the contrary, the agreement between SAL and W & R expressly negated the possibility that any other party, such as UILIC, would enjoy the status of a third-party beneficiary. The PUA between UILIC and W & R did not preclude either party from marketing the products of a competitor. Indeed, this lawsuit stems from the consequences of a provision in the PUA giving W & R the express right to represent the interests of competitors of UILIC. Such a provision countenancing divided loyalties may have appeared innocuous to UILIC in 1990 because of Torchmark's corporate structure. The fact that circumstances changed when Torchmark made the decision to spin off W & R does not justify expanding the shadow of liability for tortious interference. We conclude that W & R remained a participant in the business relationships after April 30, 2001, arising from interwoven contractual arrangements that include the variable-annuity insurance policies made the basis of UILIC's claim of tortious interference. While W & R was neither an insurer nor a policyholder, its status as a participant permitted its involvement in servicing and replacing the UILIC policies before and after April 30, 2001, without being subject to the charge of being a stranger, interloper, or meddler guilty of interference. As a matter of law, W & R was a participant in business relationships arising from interwoven contractual arrangements that included the contracts of insurance. W & R was not a stranger to these business relationships. The interwoven contractual arrangements defined the participant's rights and duties with respect to the other individuals or entities in the relationship. W & R's legitimate economic interest in and legitimate relationship with the insurance contracts allowed W & R to be involved in the insurance contracts without being subject to a claim of tortious interference. Therefore, UILIC's tortious-interference claim as to acts occurring after April 30, 2001, should not have been submitted to the jury, and the trial court should have entered a JML as to that claim. Because we conclude that W & R was entitled to a JML as to the tortious-interference claim, we need not address W & R's argument that the trial court's jury instruction concerning the stranger element was erroneous or its argument that UILIC, by offering evidence specific to only 7 of the over 7,000 policyholders whose policies were replaced, failed to adequately prove its damages as to the tortious-interference claim.