Free Trial Brief - District Court of Arizona - Arizona

GREENBERG TRAURIG, LLP 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 Plaintiff Awareness Corporation ("Awareness") hereby submits its bench memorandum regarding its claim for intentional interference with contract and business relations and punitive damages against the Distributor Defendants. Awareness brought suit against the Distributor Defendants because each defendant tortiously interfered with Awareness' contracts and business relations with its distributors and customers. The fundamental premise underlying this cause of action -- that a person has the right to pursue contractual and business expectancies unmolested by the wrongful intermeddling of a third party -- is defined in Restatement of Torts as follows: One who intentionally and improperly interferes with the performance of a contract (except a contract to marry) between another and a third person by inducing or otherwise causing the third person not to perform the contract, is subject to liability to the other for the pecuniary loss resulting to the other from the failure of the third person to perform the contract.
phx-fs1\1506177v02\8/8/05\6:30:00PM ATTORNEYS AT LAW SUITE 700 2375 EAST CAMELBACK ROAD PHOENIX, ARIZONA 85016 (602) 445-8000

Steven M. Weinberg, SBN 016817, [email protected] Brian J. Schulman, SBN 015286, [email protected] Kimberly A. Warshawsky, SBN 022083, [email protected] Attorneys for Plaintiff Awareness Corporation and Third Party Defendants Allcock and Schmidt IN THE UNITED STATES DISTRICT COURT DISTRICT OF ARIZONA Awareness Corporation, Plaintiff, v. Group Vision International, L.L.C., et al., Defendants. And related cross claims and third party actions. No. CV03-2024-PHX-DGC PLAINTIFF AWARENESS CORPORATION'S BENCH MEMORANDUM NO. 4 RE: INTENTIONAL INTERFERENCE WITH CONTRACT AND BUSINESS RELATIONS AND PUNITIVE DAMAGES

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RESTATEMENT (SECOND) OF TORTS § 776 (1979). 1 2 3 4 5 6 7 8 9
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To establish a claim for intentional interference with contract, Awareness has the burden to prove, by a preponderance of the evidence, five elements: (1) existence of a valid contractual relationship, (2) knowledge of the relationship on the part of the interferor, (3) intentional interference inducing or causing a breach, (4) resultant damages to the party whose relationship has been disrupted, and (5) that the defendant acted improperly. Safeway Ins. Co., Inc., v. Guerrero, 106 P.3d 1020 (Ariz. 2005) (citing Wells Fargo Bank v. Ariz. Laborers, Teamsters & Cement Masons Local No. 395 Pension Trust 38 P.3d 12, 31 (Ariz. 2002)). See also Bar J Bar Cattle Co., Inc. v. Pace, 763 P.2d 545, 547 (Ariz. Ct. App. 1988) (noting that it is a "tort to improperly cause the cancellation, rather than a breach, of a terminable contract" -- "a contract that is at the will of one of the parties is not necessarily terminable at the will of a third party") (emphasis in original). The only contested element at issue here is the last--whether defendants acted improperly. The Distributor Defendants assert that their actions were proper because they were "privileged" to divert Awareness' customers and distributors to Group Vision, Inc. To support that theory, these defendants have relied upon Boatman v. Samaritan Health Servs., Inc., 812 P.2d 1025 (Ariz. Ct.App. 1991). But that case does not address the privilege that the defendants assert. In Boatman, the court affirmed summary judgment because the plaintiffs failed to prove that wrongdoing they alleged disrupted an existing contract. Id. at 1029 (finding that the defendant could not intentionally interfere with a contract that did not exist at the time it allegedly committed the wrongful or improper acts). That holding does not, as the defendants have argued, establish a per-se category of acceptable or privileged conduct. Under Arizona law, the trier of fact is to determine whether the defendants' actions were proper. But the answer to that question cannot be found using a formulaic analysis of whether their conduct was "privileged" merely because the defendants were pursuing
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their own economic interests. Id. at 1026-27. ("We concur in the Restatement's rejection of the formulaic privilege concept...."). Competitors do not get a "free pass" to tortiously interfere with one another. Rather, Arizona law requires the finder of fact to consider seven factors: (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. Id. at 1027. If the Distributor Defendants violated statutory provisions or their actions were contrary to public policy, the finder of fact may infer that their conduct was improper. Wells Fargo Bank, 38 P.3d at 32-33. The defendants also cannot avoid liability if they acted with an improper purpose to further their own interests. See id. at 33-34. Arizona does not give a free hand to businessmen to interfere with the established contracts of their competitors, particularly where, as here, the plaintiff can establish that defendant engaged in wrongful, illegal, or inequitable conduct. Chanay v. Chittenden, 563 P.2d 287, 292 (Ariz. 1977). See also Bar J Bar Cattle Co., 763 P.2d at 548 (noting that, to survive summary judgment, plaintiff was required to offer evidence that defendant "acted illegally or inequitably, as for example, committing fraud, duress or abusing economic power" and holding defendant was not liable for tortious interference because of plaintiff's complete failure to prove any improper conduct). The finder of fact must give the most weight to the nature of the actor's conduct and the actor's motive. Wells Fargo Bank, 38 P.3d at 32 (citing G.M. Ambulance & Med. Supply Co., Inc. v. Canyon State Ambulance, Inc., 739 P.2d 203, 205 (Ariz. Ct. App. 1987)). Although some courts have suggested that this analysis requires the fact finder to determine whether the defendant acted with "malice," Awareness is not required to show that the defendants were motivated by spite or ill will. Chanay, 563 P.2d at 292. The

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question is simply whether the defendants intended to engage in the alleged wrongful acts. Id. But malice is relevant to punitive damages. If the Distributor Defendants

interfered with Awareness' distributor contracts with the intent to cause injury, the Court can and should impose punitive damages. Id. (citing McNutt Oil & Refining Co. v. D'Ascoli, 281 P.2d 966 (Ariz. 1955)). The proof required to support such an award consists of evidence that the defendants (1) "intended to injure the plaintiff . . . [or (2)] consciously pursued a course of conduct knowing that it created a substantial risk of significant harm to others." Gurule v. Illinois Mut. Life & Cas. Co., 734 P.2d 85, 87 (Ariz. 1987) (en banc) (quoting Rawlings v. Apodaca, 726 P.2d 565, 578 (Ariz. 1986)). This standard is satisfied by evidence that defendant' wrongful conduct was motivated by s spite, actual malice, or intent to defraud. Id. (citations omitted). Defendant' conscious s and deliberate disregard of the interests and rights of others also will suffice. Id. (citations omitted). Of course, the required evil mind may be established by defendant' express s statements or inferred from defendant' expressions, conduct, or objectives. Id. (citing s Rawlings, 726 P.2d at 578-79; Linthicum v. Nationwide Life Ins. Co., 331, 723 P.2d 675, 680 (1986). For example, defendant may have conducted himself in an outrageous or egregiously improper manner, thus permitting the inference that he intended to injure, or consciously disregarded the substantial risk that his conduct would cause significant harm. Id. RESPECTFULLY SUBMITTED this 8th day of August, 2005. GREENBERG TRAURIG, LLP By: /s/ Kimberly A. Warshawsky Steven M. Weinberg Brian J. Schulman Kimberly A. Warshawsky Attorneys for Awareness Corp. and Third Party Defendants Allcock and Schmidt
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CERTIFICATE OF SERVICE 1 2 3 4 5 6 7 8 9
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I hereby certify that on August 8, 2005, I electronically transmitted the attached document to the Clerk' Office using the CM/ECF System for filing and transmittal s of a Notice of Electronic Filing to the following CM/ECF registrants: Curtis D. Drew, Esq. 2342 North Pima Road Scottsdale, Arizona 85257-2405 [email protected] Attorney for Defendant Group Vision International, L.L.C. G. Gregory Eagleburger, Esq. The Eagleburger Law Group 2999 North 44th Street, Suite 303 Phoenix, Arizona 85018 [email protected] Attorneys for Distributor Defendants I hereby certify that on August 8, 2005, I served the attached document by facsimile and United States mail on the following, who are not registered participants of the CM/ECF System:

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/s/ J. David Smith

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