Court Opinion

ID: 9722097
Source: CourtListenerOpinion
Date Created: 2023-08-26 09:16:47.357667+00
Date Added: 2024-06-11T18:22:43.664030
License: Public Domain

Graffeo, J. (concurring).
We concur that the first certified question should be answered in the negative because, under the particular facts and circumstances of this case, Carvel’s conduct was not sufficiently improper to support a claim for tortious interference with prospective contractual relations. We write separately, however, because we find that the standard applied by the majority is too restrictive. We would adopt the rule set forth in Restatement (Second) of Torts § 766B, which provides that improper conduct is the appropriate standard in a tortious interference with prospective contractual relations case involving noncompetitors.
The Restatement (Second) of Torts distinguishes between interference by a noncompetitor and interference by a market competitor. Section 766B, applicable to noncompetitors, provides that a defendant “who intentionally and improperly interferes with another’s prospective contractual relation ... is subject to liability to the other for the pecuniary harm resulting from loss of the benefits of the relation.” In contrast, section 768 (1) *195states that a “competitor” who interferes with another’s prospective contractual relation—where “the relation concerns a matter involved in the competition between the [parties]”—will be liable for such interference only where the interferer employed wrongful means. Thus, the relevant inquiry under the Restatement in determining the applicable standard is whether the interfering party is a market competitor of the plaintiff.
We have previously applied Restatement § 768’s wrongful conduct test in cases involving competitors. In Guard-Life Corp. v S. Parker Hardware Mfg. Corp. (50 NY2d 183 [1980]), we held that where the injured party and interfering party are “business competitors,” the injured party must establish that the interfering party employed wrongful means to state a claim for tortious interference with prospective contractual relations (id. at 190-191, citing Restatement [Second] of Torts § 768). In NBT Bancorp Inc. v Fleet/Norstar Fin. Group, Inc. (87 NY2d 614 [1996]), we relied on Guard-Life in affirming the dismissal of a tortious interference claim by a financial institution against a competing bank, holding that the plaintiff produced insufficient evidence that the defendant employed wrongful means.1
Here, Carvel was not a “competitor” of its franchisees within the meaning of the Restatement. Rather, for the purposes of this claim, Carvel and its franchisees were more akin to economic partners, whose relationship contemplated cooperation, mutual promotion of Carvel products and a joint interest in maintaining consumer loyalty. Clearly, the expectations of these parties, particularly the franchisees, differed from that of commercial competitors with no product commonality. Moreover, to the extent that Carvel was technically “competing” with its franchisees for customers, such competition was not true free market competition, since Carvel was in a position of dominance by virtue of its franchisor-franchisee relationship. In this context, we therefore would apply section 766B of the Restatement rather than employ the section 768 wrongful means standard.
The majority concludes otherwise, holding that where a defendant acts in its own economic self-interest, the standard applicable to a tortious interference claim is whether the defen*196dant employed “wrongful means” or committed “egregious wrongdoing.” The majority thus posits that “it is not relevant here whether we characterize Carvel and its franchisees as ‘competitors.’ ” (Majority op at 191.) The relevant inquiry under the Restatement, however, is directed to the nature of the parties’ relationship as competitors or noncompetitors. This issue regarding the interfering party’s economic self-interest is not determinative; rather, where the parties are noncompetitors, economic self-interest under the Restatement is but one of the factors—albeit a significant one—to consider in determining whether the interferer acted improperly.2
Section 767 of the Restatement (Second) of Contracts enumerates a variety of factors to consider when evaluating a claim of improper interference:
“(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.”
Additionally, commentary to the Restatement categorizes economic pressure as one type of interference that may constitute improper conduct and specifies the factors to analyze:
“The question whether [economic] pressure is proper is answered in the light of the circumstances in which it is exerted, the object sought to be accomplished by the actor, the degree of coercion involved, the extent of the harm that it threatens, the effect upon the neutral parties drawn into the situation, the effects upon competition, and the gen*197eral reasonableness and appropriateness of this pressure as a means of accomplishing the actor’s objective” (Restatement [Second] of Torts § 767, Comment c).3
Although we conclude that the improper conduct standard should apply, we nonetheless concur with the majority holding because, based on the record in this case, the proof of economic pressure engaged in by Carvel does not rise to the level of improper conduct. Reviewing all of the factors listed in section 767, the franchisees’ proof fails to establish that Carvel acted improperly with respect to either the Type A or Type B franchisees. As an initial matter, because the determination of whether economic pressure is improper must be reviewed “in the light of the circumstances in which it is exerted” and section 767 specifies that “the relations between the parties” is a consideration, Carvel’s actions must be analyzed in the context of its contractual agreements with its franchisees.
Type B franchisees, like Giampapa, expressly agreed that Carvel could sell its products “through the same or different delivery systems or other distribution channels,” and a disclosure form clarified that such alternative marketing channels could include “supermarkets.” Because the Type B agreements expressly permitted Carvel’s sale of ice cream cakes to supermarkets, and the franchisees under such contracts had full knowledge that Carvel products could be sold in retail venues other than Carvel stores, such sales do not constitute *198economic pressure rising to the level of improper conduct sufficient to support a tortious interference claim by the Type B franchisees.
A closer case is presented with respect to the Type A franchisees. The Type A franchise agreements restrict Carvel from licensing other Carvel stores within a quarter of a mile of a franchisee, creating a relatively small sales territory for the franchisee. The agreements also refer to “a unique system for the production, distribution and merchandising of Carvel products.” The franchisees assert that Carvel’s supermarket program is inconsistent with the unique system of Carvel stores envisioned in their agreements and amounted to improper economic pressure. Because Carvel and its franchisees were not operating in an arm’s length environment, “the relations between the parties” factor weighs in the franchisees’ favor.
Balancing each of the factors, however, compels the conclusion that Carvel did not act improperly. Carvel’s conduct in selling ice cream cakes to supermarkets, in and of itself, is not coercive in nature and is not compelling evidence of improper economic pressure. Moreover, Carvel’s supermarket sales were not specifically aimed at inducing particular customers away from the franchisees; such sales were aimed at supermarket customers in general. Additionally, we agree with the majority that the franchisees’ evidence regarding Carvel’s practice of requiring them to use bags with printed coupons redeemable only at supermarkets is vague and insubstantial.
In accordance with section 767, the supermarket program must also be considered in light of Carvel’s motive, as well as the interests Carvel sought to advance through its implementation. As a result of declining sales due to growing competition in the frozen desserts industry, Carvel commissioned a study on its market decline. The study concluded that the creation of a supermarket program “is totally necessary if Carvel is to survive as a brand over the next decade.” Thus, in creating the supermarket program, which Carvel introduced in response to this study, Carvel was legitimately concerned with its future profitability and cannot be said to have been primarily motivated by a desire to interfere with relations between the franchisees and their customers.
Concluding that the franchisees’ claim does not meet the improper conduct standard, we therefore agree that the first certified question should be answered in the negative.
*199Judges G.B. Smith, Rosenblatt and Read concur with Judge R.S. Smith; Judge Graffeo concurs in result in a separate opinion in which Judge Ciparick concurs; Chief Judge Kaye taking no part.
Following certification of questions by the United States Court of Appeals for the Second Circuit and acceptance of the questions by this Court pursuant to section 500.17 of the Rules of Practice of the Court of Appeals (22 NYCRR 500.17), and after hearing argument by counsel for the parties and consideration of the briefs and the record submitted, certified question No. 1 answered in the negative and certified question No. 2 not answered upon the ground that it has been rendered academic.

. We have defined wrongful means “as representing ‘physical violence, fraud or misrepresentation, civil suits and criminal prosecutions, and some degrees of economic pressure; they do not, however, include persuasion alone although it is knowingly directed at interference with the contract’ ” (NBT, 87 NY2d at 624, quoting Guard-Life, 50 NY2d at 191).

. Of course, we agree with the majority that conduct rising to the level of an independent tort or a crime, or conduct aimed solely at harming a plaintiff, would also support a tortious interference claim.

. In discussing “economic pressure” as wrongful means, the majority limits that theory solely to situations where the defendant directs such pressure at parties with whom the plaintiff seeks a contractual relationship. The majority relies on a number of federal cases in support of this proposition (see G.K.A. Beverage Corp. v Honickman, 55 F3d 762, 768 [2d Cir 1995] [tortious interference claim dismissed because plaintiffs made “no allegations that (the defendants) had any contact with the (plaintiffs’) customers or that (the defendants) tried to convince the customers to make contracts with them rather than the (plaintiffs)”], cert denied 516 US 944 [1995]; Piccoli A/S v Calvin Klein Jeanswear Co., 19 F Supp 2d 157, 167-168 [SD NY 1998] [tortious interference claim dismissed where “the defendants’ alleged conduct concededly was not directed towards any third party with whom (the plaintiff) had an existing or prospective business relationship”]; Fonar Corp. v Magnetic Resonance Plus, Inc., 957 F Supp 477, 482 [SD NY 1997] [quoting Honickman], cert denied sub nom. Domenick v Fonar Corp., 522 US 908 [1997]). These cases suggest that the allegedly interfering party must have some direct contact with the third-party customers, thereby inducing them not to deal with the plaintiffs. In this case, Carvel did have contact with the franchisees’ customers through the supermarket program. But these cases do not hold that “economic pressure” must be exerted on third parties.