Filed: Dec. 16, 2010
Latest Update: Dec. 16, 2010
Summary: JACOBS, Justice: Before us are three consolidated appeals from a judgment of the Court of Chancery, entered after trial. The Court of Chancery adjudicated all but one of the defendants-below appellants jointly and severally liable to the plaintiffs-below appellees; and awarded appellees damages, including pre- and post-judgment interest, in the amount of $4,338,463. 1 The appellants are ASDI, Inc. ("ASDI"), Advanced Synthesis Group, Inc. ("ASG"), Michael J. Kates, Garry Smith, and Alan Blize.
Summary: JACOBS, Justice: Before us are three consolidated appeals from a judgment of the Court of Chancery, entered after trial. The Court of Chancery adjudicated all but one of the defendants-below appellants jointly and severally liable to the plaintiffs-below appellees; and awarded appellees damages, including pre- and post-judgment interest, in the amount of $4,338,463. 1 The appellants are ASDI, Inc. ("ASDI"), Advanced Synthesis Group, Inc. ("ASG"), Michael J. Kates, Garry Smith, and Alan Blize. T..
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JACOBS, Justice:
Before us are three consolidated appeals from a judgment of the Court of Chancery, entered after trial. The Court of Chancery adjudicated all but one of the defendants-below appellants jointly and severally liable to the plaintiffs-below appellees; and awarded appellees damages, including pre- and post-judgment interest, in the amount of $4,338,463.1 The appellants are ASDI, Inc. ("ASDI"), Advanced Synthesis Group, Inc. ("ASG"), Michael J. Kates, Garry Smith, and Alan Blize. The appellees are Charles Beard Research and Development, Inc. ("CB") and Beard Research, Inc. ("BR").
The bases for the judgment are set forth in the opinions of the Court of Chancery issued on May 29, 2009 and April 23, 2010 and reported, respectively, at 981 A.2d 1175 (Del.Ch.2009) (the "Spoliation Opinion") and 8 A.3d 573 (Del.Ch.2010) (the "Merits Opinion"). In the Merits Opinion, the Court of Chancery determined that: (a) ASDI, ASG, Kates, and Smith misappropriated trade secrets belonging to CB and BR in violation of the Delaware Uniform Trade Secrets Act;2 (b) Kates, aided and abetted by ASDI and Blize, breached his fiduciary duties to CB and BR; and that (c) ASDI, ASG, Blize, and Kates tortiously interfered with CB's and BR's prospective business relations with Pfizer, Inc. ("Pfizer") and other entities.
ANALYSIS
Having considered the parties' contentions, advanced both in their extensive briefs and at oral argument, we conclude that the judgment of the Court of Chancery should be affirmed on the basis of its well-written Merits and Spoliation Opinions. We additionally affirm, however, on the alternative ground that ASDI, ASG, Blize, and Kates tortiously interfered with CB's and BR's contract with Pfizer. In its Merits Opinion, the trial court held that the plaintiffs had failed to establish a claim for tortious interference with contractual relations, because Pfizer was lawfully entitled to (and did) terminate its contract with CB and BR. That ruling, in our view, interpreted too narrowly the nature and scope of a claim for tortious interference with contractual relations.
A third party's lawful termination of a contract with the plaintiff will not, of itself, bar a claim that the defendant tortiously interfered with that contract. The focus of a claim for tortious interference with contractual relations is upon the defendant's wrongful inducement of a contract termination, not upon whether the termination itself was legally justified. In this context, Delaware courts have consistently followed the Restatement (Second) of Torts,3 which recognizes a claim for tortious interference with contractual relations where the defendant utilizes "wrongful means" to induce a third party to terminate a contract.4
To be sure, the case law reflects that a defendant's tortious conduct that induces a third party to terminate a contract with the plaintiff unlawfully will suffice to establish a claim of tortious interference with contractual relations.5 But it is not essential to this cause of action that the termination be unlawful.6 Conduct amounting to tortious interference has been found actionable even where the third party is lawfully entitled to terminate a contract "at will." By way of example, tortious conduct that induced the termination of at-will employment contracts7 and commercial contracts, such as an attorney-client relationship,8 a marketing contract,9 and a sawdust supply contract,10 have been found actionable. If an "at will" contract is a permissible subject of a tortious interference claim, then so too must be any other contract, such as the Pfizer contract at issue here, that is terminated lawfully.
Neyer, Tiseo & Hindo, Ltd. v. Russell provides illustrative support.11 There, the U.S. District Court for the Eastern District of Pennsylvania found two defendants liable for tortious interference with contractual relations where, while serving as fiduciaries for the plaintiff-company, the defendants intentionally and improperly interfered with the plaintiff's completion of an engineering project contract.12 The defendants' tortious conduct included secretly meeting with the plaintiff's client to induce the client to transfer the contract to defendants' new company, and recruiting plaintiff's employees to join their new company.13 That conduct caused the plaintiff's client to terminate-lawfully-the project contract, and resulted in the defendants being held liable for tortious interference.14 Neyer supports the proposition that a lawful termination of a contract is not fatal to a claim of tortious interference with contractual relations.15 Again, that is because the focus of the claim is on the defendant's wrongful conduct that induces the termination of the contract,16 irrespective of whether the termination is lawful.
CONCLUSION
For the reasons stated above, the judgment of the Court of Chancery is affirmed.
