Opinion ID: 852692
Heading Depth: 2
Heading Rank: 3

Heading: Tortious Interference with Employment

Text: The trial court dismissed Trail’s claim against the individual board members for tortious interference with his employment contract for two reasons: 1) because “the contract expired before the alleged interference” and 2) because “a director of a corporation will not be held personally liable for inducing the corporation’s breach of its contract if the director’s actions were within the scope of his official duties.” (Order, Appellants’ App. at 13.) Trail says the trial court erred in dismissing this claim since even as an employee at will of the Boys and Girls Club, he is still entitled to assert such a claim. Moreover, Trail argues that his complaint did allege facts sufficient to demonstrate that the four individuals named as defendants acted outside the scope of their official capacities in firing him. We agree with Trail that the court was incorrect to dismiss on grounds that the contract between Trail and the Club had expired at the time of his termination. As we have explained, an at-will employee “must be able to expect that his continued employment depends on the will of his employer and not upon the whim of a third party interferer.” Bochnowski v. Peoples Fed. Sav. & Loan Ass’n, 571 N.E.2d 282, 285 (Ind. 1991). Such an employee may bring a claim for tortious interference provided that, in addition to demonstrating the standard elements of the tort, she is “prepared to show that the defendant interferer acted intentionally and without a legitimate business purpose.” Id. Trail appropriately acknowledges that the trial court was correct that officers and directors of corporations are not personally liable for tortious interference with the corporation’s contracts unless they acted outside the scope of their official duties in causing the breach. That an officer or director of a corporation possesses limited immunity from most charges of tortious interference with the corporation’s contracts stems from both their role as agents of the corporation and the nature of the tort. A party cannot “interfere” with its own contracts, so the tort itself can be committed only by a third party. See, e.g., Martin v. Platt, 179 Ind. App. 688, 690-91, 386 N.E.2d 1026, 1027 (1979). In the case of a corporation, the legal 9 entity acts through its directors and officers. Thus, when officers or directors act in their official capacity as agents of the corporation, they act not as individuals but as the corporation itself. In doing so, they are not acting as a third party, but rather as a party to the contract and cannot be personally liable for tortious interference with the contract. Conversely, when directors or officers act outside the scope of their official capacity, they no longer act as agents of the corporation and therefore act as a third party. Jones v. Lake Park Care Center, Inc., 569 N.W.2d 369, 377 (Iowa 1997). Directors and officers who act outside the scope of their official duties therefore can be held personally liable for tortious interference with a contract. Biberstine v. New York Blower Co., 625 N.E.2d 1308, 1318 (Ind. Ct. App. 1993); Martin, 179 Ind. App. at 690, 386 N.E.2d at 1027; Kiyose v. Trs. of Indiana Univ., 166 Ind. App. 34, 43-44, 333 N.E.2d 886, 891 (1975). Because the officers and directors of corporations possess some immunity from claims of tortious interference, to state a claim against the officers and directors of a corporation, Trail must not only allege the basic elements of tortious interference and those special elements related to employees at will, he must also allege some interfering act by officers or directors that rests outside their authority as agents of the corporation. Trail makes three arguments that his complaint is sufficient to state a claim against the individual defendants based on actions taken outside the scope of their authority. First, Trail argues that in investigating and evaluating Trail the directors were outside the scope of their authority. In support of this point, Trail takes issue with the trial court’s conclusion that the authority to investigate Trail fell within “the implied powers for the directors of a corporation” and states that the “only way the Trial Court could have made such a finding for [the] purposes of the T.R. 12(b)(6) motion is if the Plaintiffs had admitted it in their complain [sic] which they did not.” (Br. Appellants at 12.) This is not true. Although the trial court is limited to those facts that the plaintiff alleges in the complaint, it is not restrained from applying the law to the factual situation presented in it. Basic corporate 10 agency law indicates that directors enjoy a wide range of authorized powers including both those powers expressly granted by statute and the articles of incorporation or by-laws, and that “incidental authority necessary, usual, and proper to effectuate the main authority expressly conferred.” Indiana Dep’t of Pub. Welfare v. Chair Lance Serv., Inc., 523 N.E.2d 1373, 1377 (Ind. 1988). Certainly, such incidental authority includes the authority to investigate and evaluate the executive employees of the enterprise. To say that the directors lacked the authority to carry out the inquiry flies against standard corporation law. Perhaps recognizing this, Trail argues that because he did not allege that either the Executive Committee or the Board of Directors acting as a whole authorized the individual defendants to launch the investigation, the individual defendants cannot be considered to possess the authority. (Br. Appellants at 14.) This does not save his claim. While notice pleading does not require great specificity, it cannot be allowed to degrade into a process where all claims survive a motion to dismiss simply because the plaintiff later says, “I did not plead enough.” That is especially true where, as here, basic corporation law affords the directors authority to engage in the activity at issue. Because Trail has not alleged any fact that overcomes the presumed and implied powers of the directors, we cannot agree with Trail’s assertion that the defendants acted outside the scope of their official duties in evaluating his work. Second, Trail contends that the defendants acted outside the scope of their authority because the power to terminate Trail rested solely with the full Board of Directors. In support of this position, Trail points to his allegation that “[u]nder the Corporation’s articles, The Board has sole authority to terminate Trail,” (Compl. ¶ 19), and to Article V Section 1 of the articles of incorporation which states, in relevant part that the “business, property and affairs of the corporation shall be managed by a Board of Directors which shall have the power to . . . hire the Executive Director.” (Appellants’ App. at 35.) Copies of the corporation’s articles and by-laws were presented to the trial court with the defendants’ reply brief without objection, and both parties have referred to, and adopted, them on appeal. (Appellants’ App. at 24-33, 39-41; Br. Appellants at 2; Br. Appellees at 1,3.) These materials contradict both his assertion that the power to terminate him rested solely in the hands 11 of the Board of Directors, and his claim that the defendants in some way terminated him without action by the Executive Committee as a whole. (Articles of Incorporation Article VI Section 2, Appellants’ App. at 36 — “The Executive Committee shall be vested with the powers of the Board of Directors when the same is not in session.”; Decl. of Paul Bailey ¶ 7, Appellants’ App. at 22 — “On June 5, 2002, the Executive Committee unanimously voted to ask Eddie Trail to resign his position as Executive Director of the Boys & Girls Clubs.”). These materials certainly indicate that Trail has failed to allege any action by the individual defendants that went beyond their authority as directors. The trial court should have granted summary judgment on this claim in accordance with Trial Rule 12(B)(when “matters outside the pleadings are presented to and not excluded by the court, the motion shall be treated as one for summary judgment and disposed of as provided in Rule 56.”) Third, Trail argues that his complaint alleged that the directors acted out of ill will towards Trail, making their actions personal rather than corporate in nature. To the extent that there are any declarations of Indiana law concerning whether a director’s personal motive alone is sufficient to move an otherwise ordinary corporate decision, such as the firing of an employee, beyond the scope of the director’s authority, that authority is contrary to Trail’s position. Judge Hamilton had recent cause to review Indiana law on this point in Leslie v. St. Vincent New Hope, Inc., 873 F. Supp. 1250 (S.D. Ind. 1995). The court had before it a claim for tortious interference with an at-will employment relationship in which the plaintiff argued that her supervisor’s “motives took her [the supervisor’s] actions outside the scope of her employment.” Id. at 1255. In concluding that Indiana law would not support recovery under such a theory, the court noted that the actions taken by the supervisor — such as ultimately dismissing the employee — were within the supervisor’s duties as a supervisor, and that “motives could not affect whether her actions were within the scope of her duties.” Id. at 1257. In reaching that conclusion, the court also examined the holding in Martin v. Platt, 179 Ind. App. 688, 386 N.E.2d 1026 (1979), in which the Court of Appeals similarly held that an action will not lie against a supervisor for tortious interference when the supervisor fires an employee, irrespective of the supervisor’s motivations, if the supervisor possessed the authority to fire the employee as part of his ordinary duties. Id. at 1027. In Trail’s case, there is no 12 question that the Executive Committee possessed the authority to terminate Trail. Consequently, the defendants’ action in asking Trail to resign fell within the scope of their authority as part of that group, and no action can lie against the individual members of that group for exercising their rightful authority. Even if this were not the case, Trail has not alleged that the actions taken by the defendants were prompted by a legally improper motivation. In his complaint, Trail alleged that the defendant’s improper motivation was his refusal to defer to them on matters of corporate control. (Compl. ¶ 12.) At oral argument, Trail asserted that the defendants’ improper motivation was their desire to increase their own control over the operation of the Boys and Girls Clubs. However, in the unreported case which Trail himself cites, the court held that “[a]n increase in corporate control is not personal advantage” of the sort that takes a director or officer’s actions outside the scope their authority for the purposes of a tortious interference claim. Nagy v. Riblet Prod. Corp., 1992 WL 318604, at  (N.D. Ind. July 2, 1992). Nothing in Trail’s complaint suggests that the “personal advantage” sought by the defendants was anything other than larger influence over the direction of the enterprise.