Opinion ID: 1212725
Heading Depth: 2
Heading Rank: 1

Heading: Tortious Interference with a Contractual Relationship

Text: Minnesota law requires that five elements be established in a claim of tortious interference with a contractual relationship: (1) the existence of a contract; (2) the alleged wrongdoer's knowledge of the contract; (3) intentional procurement of its breach; (4) without justification; and (5) damages. Kallok v. Medtronic, Inc., 573 N.W.2d 356, 362 (Minn.1998) (internal quotation omitted).
Noble contends that Pandora tortiously interfered with the ongoing Noble-ACI agreement by foreclosing on its loan to ACI despite its knowledge that Noble would not be fully repaid for the hardware it had sold to ACI and would not continue to be paid maintenance fees as provided for under the contract. Even assuming that Noble's allegations could satisfy the other elements of a claim of tortious interference, they cannot show that Pandora acted without justification. Ordinarily, the existence of a justification is a question of fact that the defendant must prove. Kallok, 573 N.W.2d at 362. If an affirmative defense such as a privilege is apparent on the face of the complaint, however, that privilege can provide the basis for dismissal under Rule 12(b)(6). Bradford v. Huckabee, 394 F.3d 1012, 1015 (8th Cir.2005); Hafley v. Lohman, 90 F.3d 264, 266 (8th Cir.1996). Although our cases require the defense to be apparent on the face of the complaint, this means simply that the district court is limited to the materials properly before it on a motion to dismiss, which may include public records and materials embraced by the complaint. See Porous Media Corp., 186 F.3d at 1079; Owen v. Kronheim, 304 F.2d 957, 958 (D.C.Cir.1962) (per curiam) (considering a defense despite the plaintiff's artful avoidance of mentioning the facts giving rise to the defense because the court was aware of the facts via judicial notice and it justifiably inferred that the defense applied); see also Bradford, 394 F.3d at 1015(considering exhibits attached to the complaint as part of the complaint). Pandora's higher-priority security interest is a matter of public record and is embraced by the complaint, and it raises the affirmative defense that Pandora's conduct was justified. Generally, a defendant's actions are justified if it pursues its legal rights via legal means. Langeland v. Farmers State Bank of Trimont, 319 N.W.2d 26, 32-33 (Minn.1982). The general rule with which we are concerned is that one has a right to be secure in his contracts and to pursue his business or employment free from the interference of others except where such others act in pursuance of a superior or equal right. Bennett v. Storz Broad. Co., 270 Minn. 525, 134 N.W.2d 892, 897 (Minn.1965); see Furlev Sales and Assocs., Inc. v. N. Am. Auto. Warehouse, Inc., 325 N.W.2d 20, 25-26 (Minn.1982) (reversing a jury verdict and holding that a corporate officer and principal shareholder was justified in interfering with a contract when he acted in the best interests of his corporation); Harman v. Heartland Food Co., 614 N.W.2d 236, 241 (Minn. Ct.App.2000) (holding that a tortious interference claim does not lie where the alleged interferer has a legitimate interest, economic or otherwise, in the contract or expectancy sought to be protected and employs no improper means (internal quotation omitted)); Ludowese v. Redmann, 479 N.W.2d 59, 63 (Minn.Ct.App.1991) (affirming dismissal because the defendant's interference was justified as a matter of law because he lawfully exercised his statutory right of first refusal); see also Prosser and Keeton on Torts 983-86 (W. Page Keeton et al. eds., 5th ed.1984). Noble cannot dispute that Pandora was the highest-priority creditor. Because a senior secured creditor may foreclose and take the collateral, it seems clear that Pandora was pursuing its legal right by legal means, thus justifying its actions. Noble argues that Pandora foreclosed on its loan in bad faith, thus negating Pandora's justification. Bad faith can constitute evidence that the defendant's conduct was not justified. Nordling v. N. States Power Co., 478 N.W.2d 498, 506 (Minn.1991). Generally, however, bad faith means nothing more than wrongful conduct done without legal justification or excuse, id., which is essentially the same test used to determine whether a defendant's actions are justified, as discussed above. See Langeland, 319 N.W.2d at 32-33. We applied this understanding of bad faith in Thompson v. United States, 408 F.2d 1075 (8th Cir.1969). In Thompson, we altered the priority of secured interests because of the senior creditor's bad faith towards the junior creditor. We held that the Thompson corporation (owned by Thompson, his sons, and a few other family members) was not operating in good faith because it acquired priority over the government only by wrongfully participating with the Thompson partnership (consisting of Thompson and his sons) in breaching the partnership's security agreement with the government. The relationship between the Thompson partnership and the Thompson corporation is so close that the corporation must be charged with participation in the partnership's breach of the regulatory agreement. Id. at 1084. We concluded that the Thompson corporation had more than actual knowledge of the partnership's agreement and that [u]nder the circumstances of this case, good faith would require the members of the Thompson family and any of its business entities to observe and abide by these contractual agreements. Id. at 1083, 1085. The facts in Thompson are readily distinguishable from the facts alleged here. In this case, Pandora's alleged bad faith consisted primarily of its knowledge of the unperfected security interest and its foreclosure in the face of its knowledge that junior creditors like Noble would not have their claims satisfied at the foreclosure sale. Neither of these allegations calls into question the legitimacy of Pandora's ends or means. Unlike the Thompson partnership, ACI derived no benefit from the foreclosure, and unlike the Thompson corporation, Pandora cannot be charged with a duty to observe and abide by ACI's contract with Noble. A junior creditor cannot sue a senior creditor for tortious interference solely because the senior creditor forces a foreclosure sale against the junior creditor's wishes or because the sale does not generate enough income to satisfy the junior creditor. Noble has not pleaded facts to support its argument that Pandora was not justified in its foreclosure and sale of ACI's assets, and we thus affirm the district court's dismissal of Noble's tortious interference claim. Noble's tortious interference claim also rests heavily on its allegations of fraud, which are meritless for the reasons discussed below.
Almost all of the acts that rendered ACI incapable of fulfilling its contractual obligations to Noble were completed prior to Alorica's involvement. According to Noble's complaint, Gary Kohler facilitated Pandora in its move to become the primary creditor of ACI. Pandora notified ACI that it was pulling ACI's line of credit on June 15, 2005. Because Pandora had no contact with Alorica until June 17, 2005, the only allegedly wrongful act Alorica could have committed was its declining to purchase ACI's assets directly from ACI and instead agreeing to buy them at a foreclosure sale. There appears to be no basis for holding that Alorica had a legal or equitable duty to accept ACI's offer rather than Pandora's offer, and Alorica's decision to buy from Pandora could not have been the cause of the events that were set in motion prior to Alorica's involvement. To borrow a concept from another area of tort law, Alorica had no duty to rescue ACI, much less Noble. Accordingly, the district court did not err by dismissing the tortious interference claim against Alorica.