Plaintiff, the operator of an automobile body repair shop in Coos Bay, Oregon, sued defendant insurance company for general and punitive damages for injuries alleged to result from defendant's wrongful practices in directing insurance claimants to have repairs made at body shops other than plaintiff's. The complaint pleaded causes of action grounded in two theories: First, tortious interference with plaintiff's business, and second, inducement of other body shops to accord defendant discriminatory price advantages prohibited by statute. On the second claim plaintiff also requested an injunction. Defendant answered by general denials and an affirmative defense to the tort claim asserting a privilege of acting in its own legitimate financial interests. Plaintiff replied that defendant's methods and intent took its actions beyond any such privilege.
The trial resulted in jury verdicts for plaintiff in amounts of $20,000 compensatory and $250,000 punitive damages on the tort claim and $45,000 in treble damages on the price discrimination claim. On defendant's motion, the trial court entered judgments notwithstanding the verdicts on both causes of action, primarily for failure of proof. The court also allowed defendant's alternative motion for a new trial pursuant
I. The claim of tortious interference.
Although other jurisdictions have decided numerous claims of tortious interference with business relations, this court has had few occasions to consider the elements of this tort. See Wampler v. Palmerton, 250 Or. 65, 439 P.2d 601 (1968), and cases id. at 73 n. 8, 439 P.2d 601; American Sanitary Service, Inc. v. Walker, 276 Or. 389, 554 P.2d 1010 (1976); and Comini v. Union Oil Co., 277 Or. 753, 562 P.2d 175 (1977). We therefore begin with a brief description of the problem.
Tort claims for wrongful interference with the economic relationships of another have an ancient lineage. Their history has been traced from interference with members of another's household in Roman law or with his tenants in English law, with his workmen after the 1349 Ordinance of Labourers, with prospective workmen or customers, with existing contracts for personal services, Lumley v. Gye, 118 Eng.Rep. 749 (QB 1853), and with contracts generally, Temperton v. Russell  1 QB 715 (CA), to contemporary forms not dependent on the existence of a contract. See Wampler v. Palmerton, supra, citing Sayre, Inducing Breach of Contract, 36 Harv.L.Rev. 663 (1923); Carpenter, Interference with Contract Relations, 41 Harv.L.Rev. 728 (1928) (also published in 7 Or.L.Rev. 181, 301 (1928)). Despite these antecedents, protection in tort against interference with business relations has been described as largely a twentieth-century development. Prosser, Handbook of the Law of Torts § 129, at 927 (4th ed. 1971). A recent study regards the generalized concept of "tortious interference" as "[o]ne of the most fluid and rapidly growing tort theories," comparable to products liability, and promising to become the predominant remedy for a multitude of business wrongs. Estes, Expanding Horizons in the Law of Torts — Tortious Interference, 23 Drake L.Rev. 341, 341, 363 (1974).
Either the pursuit of an improper objective of harming plaintiff or the use of wrongful means that in fact cause injury to plaintiff's contractual or business relationships may give rise to a tort claim for those injuries. Prosser, Handbook of the Law of Torts § 130 at 952 (4th ed. 1971). However, efforts to consolidate both recognized and unsettled lines of development into a general theory of "tortious interference" have brought to the surface the difficulties of defining the elements of so general a tort without sweeping within its terms a wide variety of socially very different conduct.
The term "purposely" meant that a defendant must not only have expected, or "intended," his conduct to interfere with plaintiff's contract or business relationship but that this interference must have been at least one purpose of defendant's act.
In preparing the Restatement (Second) of Torts in 1969, the then Reporter, Dean William Prosser, proposed to change "purposely" to "intentionally" with respect to any interference with an existing contract that was not justified by a privilege. He would have retained "purposely" with respect to interference with future contractual relations.
Meanwhile, the decision in Nees v. Hocks, 272 Or. 210, 536 P.2d 512 (1975), rejected the concept that every intentional infliction of harm is prima facie a tort unless justified. Finding that this concept was no longer needed to escape the rigidity of the common-law forms of pleading, the court concluded that it created as many difficulties as it solved.
We conclude that the approach of Nees v. Hocks is equally appropriate to claims of tort liability for intentional interference with contractual or other economic relations. In summary, such a claim is made out when interference resulting in injury to another is wrongful by some measure beyond the fact of the interference itself. Defendant's liability may arise from improper motives or from the use of improper means. They may be wrongful by reason of a statute or other regulation, or a recognized rule of common law,
In the present case, Top Service pleaded both improper motives and improper means of interference. It alleged that Allstate sought to and did induce Top Service's patrons not to have Top Service repair their automobiles, making false statements about the quality of plaintiff's workmanship and threats about withdrawing insurance coverage or subjecting the settlement of claims to possible arbitration. It also alleged that this was done "with the sole design of injuring Plaintiff and destroying his business," and in an endeavor to "compel Plaintiff to abandon the same." If proved, along with damages and causation, these allegations satisfy the elements of the tort we have reviewed above.
Defendant contended successfully in the trial court that the evidence, taken most favorably to plaintiff, was insufficient to support a verdict for plaintiff. Judge Warden's order recited two grounds for allowing the motion for judgment n.o.v. on the first cause of action. The first was that "there was no evidence that defendant's conduct was the result of a specific intent directed at the plaintiff or that its purpose was to interfere with the plaintiff, as such." Any impact on plaintiff of defendant's dealings with its insurance claimants was described as "incidental and collateral." The second ground was that defendant acted only within its legal privilege of dealing with its insurance claimants in pursuit of its own lawful business interests.
As to the first issue, Top Service does not really argue that there was direct evidence to show that Allstate had acted with the destructive design quoted above.
Taken most favorably to plaintiff, as is proper after a verdict for plaintiff, the evidence showed that Allstate has a practice of designating certain repair shops in the locality as "competitive shops" to which it prefers to send insurance claimants for whose repairs Allstate is obligated; that Top Service at one time was a "drive-in" shop for Allstate, where claimants would be directed for an estimate by an Allstate insurance adjuster; that after a dispute Top Service's owner decided that it would not continue as a drive-in shop for Allstate; and that thereafter Allstate adjusters would actively discourage claimants under its insurance policies from taking work to be paid for by Allstate to Top Service, sending them instead to other shops on its preferred list. As specific bases for an inference of destructive purpose, Top Service lists two occasions when Allstate adjusters disparaged the quality of Top Service's work (apart from its relative cost), although Allstate personnel had generally considered Top Service a high quality shop; Allstate's willingness to disappoint its own insured who preferred Top Service; one occasion when Allstate took its option to "total" a car, i.e. to pay off its value, when the insured wanted it repaired at Top Service; and finally Allstate's resort to "improper and unlawful means" to direct business away from Top Service to other shops. Without setting forth here the excerpts of the record cited by plaintiff, we agree with the trial court that these acts were wholly consistent with Allstate's pursuit of its own business purposes as it saw them and did not suffice to support an inference of the alleged improper purpose to injure Top Service. The court's ruling on this point was not error.
Plaintiff argues, however, that evidence that would support such an inference was improperly excluded. Several witnesses were called to testify to occasions, after the complaint in this case was filed, when Allstate discouraged their taking repair jobs to Top Service. In its brief, plaintiff represents that this evidence would have shown continued interference and disparagement by Allstate after Allstate was on notice, by virtue of the complaint, that Top Service regarded its conduct as wrongful and damaging to Top Service.
More directly to this point, plaintiff offered the testimony of two witnesses to remarks made by William Erickson, a former claims adjuster for Allstate in Coos Bay who had become a claims supervisor for the company in Eugene. Donald Stover, claims manager for another insurance company, testified in an offer of proof to a conversation in November 1975 in which Erickson said that if Top Service continued with its lawsuit against Allstate, "they" would bring up matters documented in their files that would put Top Service out of business. Hugh Berger, son of Top Service's owner, similarly testified in an offer of proof that on a social visit to Erickson's home in December 1975 Erickson "was bragging about how much power he had with Allstate"; that Erickson "was talking
In Timber Access Industries Co. v. U.S. Plywood-Champion Papers, Inc., 263 Or. 509, 503 P.2d 482 (1972), this court compared the rule for the admissibility of an agent's admissions against his employer stated in McCormick on Evidence and in the Model Code of Evidence,
Plaintiff contends that its case did not depend solely on proof of Allstate's wrongful motive. It argues that, contrary to the trial court's conclusion, Allstate would not be privileged to interfere with plaintiff's business relations by unlawful or otherwise improper means even in pursuit of its own business objectives. As unlawful or improper practices, plaintiff points to defendant's disparagement of its services, the price discriminations discussed in Part II, below, and violation of other statutory policies.
II. The Price Discrimination Claim.
In its second cause of action plaintiff claimed treble damages under ORS 646.140 for lost profits due to unlawful price concessions obtained by Allstate from competing body shops. This claim depends on proof of the relevant elements defined by the "Antiprice Discrimination Law," ORS 646.010 — 646.180.
The prohibitions of this law are mostly addressed to the purveyor of goods or services who grants the forbidden concession. The obligation of the recipient is stated in ORS 646.090, which reads:
Thus the injured plaintiff in an action under ORS 646.140 or 646.150 must show (1) that the defendant was engaged in "trade or commerce within this state," ORS 646.020, (2) that the defendant induced or received a discrimination in price, (3) that this occurred in the course of such commerce, (4) that the price discrimination was one prohibited by ORS 646.040 to 646.080, (5) that the defendant induced or received the forbidden price concession "knowingly." Plaintiff must also show that he sustained damages from defendant's actual or threatened violation of the statute, but damages equal to the amount of the unlawful discrimination are "conclusively presumed." ORS 646.160. The fourth of these elements of a case against the recipient of a discriminatory concession requires proof that the concession was a violation of the statute by his seller or purveyor. In this case, the section which plaintiff apparently claims to have been violated is ORS 646.040.
Proof of a violation of ORS 646.040 in the present context, in turn, requires (1) that the seller or purveyor was engaged in commerce, (2) that he "directly or indirectly" discriminated in price "between different purchasers of commodities, or services or output of a service trade, of like grade and quality," (3) that this occurred in the course of such commerce, as above, (4) that the effect of "such" discrimination may be substantially (a) to lessen competition in
Under the Federal Robinson-Patman Act the allocation of the burden to prove these elements of violation and defense in a case against the recipient of concessions has been complex and controversial. See Automatic Canteen Co. of America v. FTC, 346 U.S. 61, 73 S.Ct. 1017, 97 L.Ed. 1454 (1953), Kintner, A Robinson-Patman Primer 254-262 (1970), Shniderman, Price Discrimination in Perspective 139-147 (1977). It is easier for the Federal Trade Commission to assume a large share of that burden under the federal law than it is for injured plaintiffs under the state law, who are likely to be smaller enterprises than a defendant who can obtain a price concession. ORS 646.050 provides that once the discrimination itself is shown, "the burden of rebutting the prima facie case thus made by showing justification is upon the person charged with the violation."
In the present case, plaintiff contended that the following constituted unlawful price discriminations obtained by Allstate from plaintiff's competitors. First, there was evidence from which the jury could find that Allstate asked Top Service to give it a discount on the hourly rate for labor on repairs for which Allstate had to pay, which Top Service declined to do, and that Allstate did receive a five percent discount from Gold Coast Body Shop. Second, Allstate's estimates of repair costs used a schedule of painting costs developed by Allstate itself, which was substantially lower than the manuals otherwise used by body shops to estimate these painting costs. In negotiating the total price of a repair job with body shops, Allstate requested and received acceptance of its paint schedule from competing shops, though not from Top Service, and the jury could infer that other customers of the competing shops were charged for painting at a higher rate. Third, there was evidence from which the jury could find that competing shops, in order to get Allstate's business, sometimes omitted repairs to the vehicles of Allstate's insurance claimants which Allstate's adjusters did not wish included in the claim for which it was obligated. This third charge, however, is not a discrimination in price for services "of like grade and quality" under ORS 646.040. Its essence is that other body shops were willing to make repairs of lower grade or quality for Allstate than for other insurance companies, not that they charged less for the repairs that they did make.
With respect to the first two charges, defendant argues generally that the concept of price discrimination, which was designed to deal with differences in the prices charged to different contemporaneous buyers of identical merchandise, does not fit the situation of individually negotiated transactions involving case-by-case estimates and judgments. No doubt proof of discrimination in such situations is more difficult, but since the Oregon statute extends beyond goods or commodities to "services or output of a service trade," individual service transactions cannot be excluded altogether. Doubtful as it might be to infer discrimination in such transactions merely from evidence of price differences in comparable sales, when there is direct evidence of a price concession or advantage to one buyer that is identified as such, a prima facie case of discrimination has been made out. Defendant contends that there was nothing to show that the "5 percent discount" noted on estimates of Allstate jobs by Gold Coast Body Shop was a discount from a "standard price," but the jury could infer that the words meant a discount from the price that Gold Coast would have charged another customer for the same work. As the court noted in W.J. Seufert Land Co. v. National Restaurant Supply Co., 266 Or. 92, 111, 511 P.2d 363 (1973), the purpose of the act is to protect the public from "any scheme of special concessions or rebates, any collateral contracts or agreements or any device of any nature whereby discrimination is, in substance or fact, effected," quoting ORS 646.010. Similarly, the substitution of Allstate's schedule to estimate the cost of painting for the schedules in other manuals is plainly a matter for negotiation; but when a jury could infer that Top Service's competitors allowed Allstate a lower rate for painting than they charged their other customers, a prima facie case of discrimination is shown. Of course, it is only a prima facie showing of one of the elements under ORS 646.040. The justification of meeting competition urged by defendant is a matter of defense
Assuming that the first three requirements of ORS 646.040 listed above have been met, plaintiff's case requires evidence that the price concessions Allstate received from Top Service's competitors substantially threatened to have one of the anticompetitive effects stated in that section. This issue was submitted to the jury under instructions which focused almost entirely on competition among body repair shops. These instructions stated repeatedly that there "must be an injury" to competition, once that there "must be a reasonable probability" of an effect on competition, and once "a reasonable possibility" of an effect on competition.
However, plaintiff does not point to any evidence of actual or potential lessening of competition or incipient monopolization in the relevant market, either among body repair shops or among automobile insurance companies. Plaintiff's brief merely states that "the jury was entitled to infer that such discrimination would result in the injury to competition both among insurance companies and among body shops." It does not cite any evidence in the transcript from which the jury might draw such an inference. The economic effects of Allstate's negotiations for reduced rates for repairs or painting on competition among repair shops or insurance companies are not self-evident nor a matter within the common sense of jurors. Plaintiff does not claim that Allstate bargained for exclusive reductions, not available to other customers of the body shops, or that Allstate would not let other shops than its preferred "competitive shops" meet the estimates its adjusters calculated and thus compete to repair the cars of Allstate's insurance claimants. If there were actual or potential anticompetitive effects of the discounts and paint schedules — the actions which we have said could be found to be discriminatory — they are not shown in this record.
The judgment is affirmed.
Another problem is that an overbroad generalization reaches the complex questions of liability for negligent conduct causing business injuries to a chain of different parties. See Harper & James, The Law of Torts § 6.10 (1956); Note, Negligent Interference with Economic Expectancy: The Case for Recovery, 16 Stan.L.Rev. 664 (1964).
Restatement of Torts § 766, Comment d (1939).
See also Comment
Model Code of Evidence rule 508 (1942).
The word "such" quoted in the text would literally forbid a particular act of price discrimination if "such" discrimination, i.e. discrimination of that type, might injure competition. However, on the basis of decisions under the Robinson-Patman Act, 15 U.S.C. § 13a (1976), on which this statute was patterned, we read the word to result only from the deplorable habit of draftsmen to misuse "such" for "the," "this," or "that," so that the section requires proof of potential injury to competition from the particular discriminatory price. See, e.g., FTC v. Morton Salt Co., 334 U.S. 37, 46, 68 S.Ct. 822, 92 L.Ed. 1196 (1948); Continental Baking Co. v. Old Homestead Bread Co., 476 F.2d 97, 103 (10th Cir.), cert. denied, 414 U.S. 975, 94 S.Ct. 290, 38 L.Ed.2d 218 (1973); Rowe, Price Discrimination Under the Robinson-Patman Act §§ 6.4, 6.8 (1962). This usage and its interpretation followed that of the Clayton Act. See, e.g., George Van Camp & Sons v. American Can Co., 278 U.S. 245, 252-253, 49 S.Ct. 112, 73 L.Ed. 31 (1929); American Can Co. v. Ladoga Canning Co., 44 F.2d 763, 766 (7th Cir.1930), cert. denied, 282 U.S. 899, 51 S.Ct. 183, 75 L.Ed. 792 (1931); McAllister, Sales Policies and Price Discrimination Under the Clayton Act, 41 Yale L.J. 518, 520, 524 (1932).
It should be noted that the defense of cost differentials applies only to commodities, not services.
The need to find injury to "competition" was repeated six more times in general terms. In the context, the notion that price advantages to Allstate in Coos Bay might substantially affect competition among automobile insurers or among persons whose automobiles were repaired at different costs could have occurred to the jury only from these abstract references. In any event, this would have been sheer speculation in the absence of evidence.