MacKlin v. Robert Logan Associates

ROBERT M. BELL, Judge. Robert Logan Associates, the appellee, filed suit in the Circuit Court for Prince George’s County against Clifford and Sandra Macklin, 1 the appellants, alleging unlawful appropriation of its trade name, “Golden Cue,” and tortious interference with its lease. After a jury trial, verdicts were entered in favor of the appellee as follows: for unlawful appropriation of trade name, compensatory damages of $300 and punitive damages of $50,000 and for tortious interference with the appellee’s lease, $100,000 compensatory damages and $75,000 punitive damages. Their motion for new trial, to revise judgment and for judgment notwithstanding the verdict having been denied, appellants noted a timely appeal to the Court of Special Appeals.

Before that court considered the matter, we granted certiorari, 329 Md. 22 , 616 A.2d 1286 , on our own motion, to address two issues: (1) whether the appellants ²⁹² tortiously interfered with the appellee's lease 2 by negotiating ²⁹³ with the appellee’s landlord for the lease of premises occupied by the appellee prior to termination of appellee’s lease and, (2) whether the trial court erred in sustaining the jury’s punitive damages awards. I. The appellee owned and operated a billiard room business, in leased premises, located in the Bladensburg Shopping Center in Bladensburg, Maryland, but serving a wide area, including northern Virginia, Clinton, Waldorf, Silver Spring, College Park, Beltsville, Greenbelt, and Laurel. The business was operated under the trade name, “Golden Cue.” The business had been in operation for some time prior to the events precipitating this case and, during that time, received favorable media publicity as a family billiard center. The appellee’s lease was renegotiated in February, 1985.

Its new lease, which was for a term of five years, contemplated the possibility that the shopping center would be sold. The lease provided that either party could terminate the lease by giving 90 days notice, but only after three years of the lease term had passed. It also provided that if the lease were terminated by the landlord, the landlord must, in addition, pay the appellee $5,000. 3 The rental payments due under the ²⁹⁴ lease ranged from a low of $1,200 per month at its inception to a high of $1,500 a month at the end of the term. The shopping center was sold to GLM, the landlord, in July, 1986.

Following unsuccessful attempts to renegotiate the terms of the appellee’s lease, GLM exercised its option to terminate the lease by letter dated May 16, 1989, giving the appellee 90 days to vacate the premises. Upon receipt of the cancellation notice, the appellee immediately contacted GLM for the purpose of renegotiating the lease. GLM refused to do so and advised the appellee, albeit without identifying to whom, that the premises had been leased to a new tenant. GLM subsequently leased a portion of the premises formerly leased by the appellee to the appellants for a term of five yegrs, commencing thirty days after May 26, 1989, when GLM delivered the lease to Clifford Macklin.

Although covering the same use, i.e., “billiard lounge and retail billiard supply sales as presently operated,” 4 appellants’ lease was more favorable to GLM than the appellee’s had been. Rather than a maximum monthly rental of $1,500, the appellants agreed to pay fixed annual minimum rents ranging from $2,404.79 in the first year to $3,253.54 in the fifth year, with an increase each year. In addition, the appellants agreed to pay as additional ²⁹⁵ rent, $12,500, “due upon commencement of the lease, to cover cost related to the conversion of the existing space of 5157 square feet of two stores in order to conform to tenants’ needs.” Among the conversion costs was the $5,000 payment due the appellee upon the landlord’s cancellation of the lease. The appellants executed the lease on May 26, 1989; however, negotiation of the terms of the lease occurred prior to that date. 5 Before they executed the lease, the appellants investigated the feasibility of obtaining a use and occupancy permit.

Because the use and occupancy permit applicable to the appellee’s premises had been issued in the name of “The Golden Cue” as a result of a grandfathered special exception, they learned that it would have required extensive and complex legal proceedings to obtain one in any other name. Consequently, the appellants effected a transfer of the use and occupancy permit by using the name, “Golden Cue.” Subsequently, having discovered that the appellee had neither formally registered “The Golden Cue” as a trade name nor formed a corporation under that name, the appellants incorporated as Golden Cue, Inc. So armed, the appellants sought to obtain the exclusive use of the telephone number listed for ²⁹⁶ The Golden Cue. 6 Also in the fall of 1989, the appellants wrote to the appellee informing it that the appellants had formed a corporation under that name and complaining of the appellee’s use of “its” trade name. Prior to the termination of the appellee’s lease, Clifford Macklin, who, at one time, sold cues to the appellee for resale, was permitted by Logan Sharp, the appellee’s operator, to store equipment in premises the appellee leased on a month-to-month basis for storage. Logan Sharp testified that Clifford Macklin had expressed an interest in purchasing the appellee’s business in 1989.

The matter was dropped when Clifford Macklin was informed that the purchase price would be between $150,000 and $175,000. The appellee also presented testimony that Clifford Macklin had stated on several occasions that “he was going to take the business from Logan ... [because] Logan was fooling around with him in business dealings.” Having to vacate the premises, the appellee advertised its billiard tables for sale. The appellants responded to the advertisement and offered to purchase not only the billiard tables, but all of the appellee’s billiard equipment for $20,000. Believing that price to be too low, the appellee declined the offer.

II

The tort of intentional interference with contract is well established in Maryland. Travelers Indemnity v. Mer ²⁹⁷ ling, 326 Md. 329 , 605 A.2d 83 (1992); K & K Management v. Lee, 316 Md. 137 , 557 A.2d 965 (1989); Sharrow v. State Farm Mutual, 306 Md. 754 , 511 A.2d 492 (1986); Vane v. Nocella, 303 Md. 362 , 494 A.2d 181 (1985); Natural Design, Inc. v. Rouse Company, 302 Md. 47 , 485 A.2d 663 (1984); Rite Aid Corp. v. Lake Shore, Inc., 298 Md. 611 , 471 A.2d 735 (1984); Wilmington Trust Company v. Clark, 289 Md. 313 , 424 A.2d 744 (1981); Cunningham v. A.S. Abell Co., 264 Md. 649 , 288 A.2d 157 , cert. denied, 409 U.S. 865 , 93 S.Ct. 160 , 34 L.Ed.2d 114 (1972); Stannard v. McCool, 198 Md. 609 , 84 A.2d 862 (1951); Miller v. Preston, 174 Md. 302 , 199 A. 471 (1938); Green v. Samuelson, 168 Md. 421 , 178 A. 109 (1935); Pocketbook Workers v. Orlove, 158 Md. 496 , 148 A. 826 (1930); Goldman v. Harford Road Building Association, 150 Md. 677 , 133 A. 843 (1926); McCarter v. Chamber of Commerce, 126 Md. 131 , 94 A. 541 (1915); Cumberland Glass Manufacturing Company v. DeWitt, 120 Md. 381, 87 A. 927 (1913), aff'd, 237 U.S. 447, 35 S.Ct. 636 , 59 L.Ed. 1042 (1915); Sumwalt Ice and Coal Company v. Knickerbocker Ice Company, 114 Md. 403 , 80 A. 48 (1911); Willner v. Silverman, 109 Md. 341 , 71 A. 962 (1909); Knickerbocker Ice Company v. Gardiner Dairy Company, 107 Md. 556 , 69 A. 405 (1908); Klingel’s Pharmacy v. Sharp & Dohme, 104 Md. 218 , 64 A. 1029 (1906); Gore v. Condon, 87 Md. 368, 39 A. 1042 (1898); Lucke v. Clothing Cutters’ & Trimmers’ Assembly, 77 Md. 396, 26 A. 505 (1893). The tort, which has two general manifestations, Natural Design, Inc., 302 Md. at 69 , 485 A.2d at 674 , is committed when a third party’s intentional interference with another in his or her business or occupation induces a breach of an existing contract or, absent an existing contract, maliciously or wrongfully infringes upon an economic relationship. Sharrow, 306 Md. at 763 , 511 A.2d at 497 ; Natural Design, Inc., 302 Md. at 69 , 485 A.2d at 674 .

See Restatement (Second) of Torts § 766. 7 ²⁹⁸ While the two manifestations of the tort share an underlying rationale, i.e., “under certain circumstances, a party is liable if he interferes with and damages another in his business or occupation,” they differ in their tolerance of interference. As we said in Natural Design, Inc.: “[W]here a contract between two parties exists, the circumstances in which a third party has a right to interfere with the performance of that contract are more narrowly restricted. A broader right to interfere with economic relations exists where no contract or a contract terminable at will is involved.” Id. at 69-70, 485 A.2d at 674 . Count two of the amended complaint alleges that the appellants, well knowing of the Plaintiffs lease, ... did approach The GLM Companies, the manager for the Landlord, and maliciously and with the intent to injure the Plaintiff did induce the said Landlord to breach and/or cancel the lease with the Plaintiff notwithstanding that said lease had until February 29, 1990 to run and could be renewed fully intending to appropriate the Plaintiffs trade name, business and goodwill thereby causing the Plaintiff the loss of his business and profits earned and to be earned.

Although it recognizes that the effect of cancellation of the lease would be to cause the appellee prospective loss, the primary focus of this allegation is on the appellants’ inducement of the landlord to cancel the lease, perhaps because of the appellee’s recognition that, until the option to cancel is exercised, a lease terminable at will is an existing contract. It views this case as involving the breach of an existing contract. ²⁹⁹ Indeed, that is the way the appellee argued the case, both in brief and at oral argument. Notwithstanding that a lease terminable at will is an existing contract until it is cancelled, neither party to it has a vested interest in its continuation — it may or may not continue at the sole option of one of the parties. Thus, as Natural Design recognizes, a contract terminable at will is more closely akin to the situation where no contract exists. 302 Md. at 69-70 ; 485 A.2d at 674 .

And because the effect of the exercise of the option to cancel is interference with prospective economic relationships, it is that branch of the tort that is implicated when the termination of such a contract is induced. Id. See Restatement (Second) of Torts § 768(1). The appellee having alleged that the appellants maliciously interfered with its lease by initiating negotiations with GLM and accepting a lease for the space the appellee occupied, at terms more favorable to GLM, before the appellee’s lease terminated, the jury found that the appellants induced GLM to cancel the existing lease agreement with the appellee.

The appellants mount a two-pronged attack on the jury’s verdict. First, they assert that, taken in the light most favorable to the appellee, the evidence was legally insufficient. In that regard, the appellants maintain that their conduct subsequent to the cancellation of the appellee’s lease is irrelevant on the issue of whether they tortiously interfered with that lease. Moreover, they continue, the appellee’s heavy reliance on the fact that the appellants leased the premises it once occupied, and used them for the same purpose, as well as its reliance on the appellants’ use and efforts to continue to use the appellee’s trade name inappropriately focus on the consequences of the cancellation of the lease rather than its cause.

They find particularly revealing, the concession made by the appellee’s trial counsel: “[I]f they went in there and operated a bakery I don’t think we’d be here today.” The appellants observe, “if the defendants tortiously interfered with plaintiffs lease but opened a bakery, defendants would still be liable for the tortious interference.” Appellants’ brief at 13. ³⁰⁰ Noting the requirement that the interference must have been wrongful or unlawful, Merling, 326 Md. at 343 , 605 A.2d at 90 ; Sharrow, 306 Md. at 765 , 511 A.2d at 498 ; Natural Design, Inc., 302 Md. at 71-74 , 485 A.2d at 675 ; Stannard, 198 Md. at 616 , 84 A.2d at 866 , and the types of unlawful means identified in Lee, 316 Md. at 155-170 , 557 A.2d at 973-81 , ie., “violence, intimidation, defamation, injurious falsehood or other fraud, violation of criminal law and the institution or threat of groundless civil suits or criminal prosecution in bad faith,” none of which, they point out, is applicable to the case sub judice, the appellants assert that “there was no testimony of any such conduct in this case and the evidence presented by the plaintiff was totally devoid of any reference to the defendants’ attempting to influence GLM in its decision to terminate the lease of the plaintiff.” Appellants’ brief at 10. They contend, rather, that their negotiating with GLM and ultimately entering into a lease agreement with it for the operation of a billiard room business like the one conducted by appellee constituted legitimate competition for the space the appellee once occupied. 8 As they see it, because the lease contained a provision giving each party the right to terminate the lease upon 90 days notice, after the expiration of the third year, it was a lease that was terminable at will. Accordingly, the appellants argue that they were entitled to greater leeway in interfering with, such contract than had it not contained such a provision. In any event, they assert, irrespective of their intention as to the contractual relationship between GLM and the appellee, in point of fact, because it was legitimate competition, although it may have affected the appellee’s contractual relationship, their conduct simply was not improper. ³⁰¹ To establish tortious interference with prospective contractual relations, it is necessary to prove both a tortious intent and improper or wrongful conduct.

Lee, 316 Md. at 155-170 , 557 A.2d at 973-981 ; Sharrow, 306 Md. at 765 , 511 A.2d at 498 ; Natural Design, Inc., 302 Md. at 71-74 , 485 A.2d at 675 ; Restatement (Second) of Torts § 766B. See Merling, 326 Md. at 343 , 605 A.2d at 90 (“for one to recover for tortious interference with contractual or economic relations, the interference must have been wrongful or unlawful.”). A plaintiff may prove tortious intent by showing that the defendant intentionally induced the breach or termination of the contract in order to harm the plaintiff or to benefit the defendant at the expense of the plaintiff. What is improper or wrongful conduct is incapable of precise definition, see Lee, 316 Md. at 155-70 , 557 A.2d at 973-81 ; Sharrow, 306 A.2d at 765, 511 A.2d at 498 ; Natural Design, Inc., 302 Md. at 71-74 , 485 A.2d at 675 ; ordinarily whether particular conduct is proper or improper is a factual question to be determined on the basis of all the facts and circumstances.

Natural Design, 302 Md. at 71 , 485 A.2d at 675 . While a plaintiff may prove that a defendant acted improperly or wrongfully by showing that he or she used violence, intimidation, injurious falsehood or other fraud, violated the criminal law, and instituted, or threatened, groundless civil suits or criminal prosecutions in bad faith, Merling, 326 Md. at 343 , 605 A.2d at 90 ; Lee, 316 Md. at 155-70 , 557 A.2d at 973-81 ; Sharrow, 306 A.2d at 765, 511 A.2d at 498 ; Natural Design, Inc., 302 Md. at 71-74 , 485 A.2d at 675 ; Stannard, 158 Md. at 616 , 84 A.2d at 866 ; Gardiner Dairy Company, 107 Md. 556 , 69 A. 405 ; Lucke, 77 Md. 396 , 26 A. 505 , in fact, conduct that is quite subtle, nevertheless, can be improper or wrongful. It is clear that, to be improper or wrongful, conduct need not be as overt as that in Gardiner Dairy Company, 107 Md. 556 , 69 A. 405 (defendant threatening to breach an existing contract with the plaintiff if plaintiff did not terminate its contract with third party) and Lucke, 77 Md. 396 , 26 A. 505 (defendant caused employer to discharge employee by threatening to notify unions that employer was a non-union shop). In any event, to be actionable, the improper ³⁰² or wrongful conduct must induce the breach or termination of the contract.

Sharrow, 306 Md. at 765 , 511 A.2d at 498 . Simply because a person induces another to exercise an existing right to terminate a contract, even if that person’s intention with regard to one of the parties to the contract is tortious, does not make it actionable. That is, his or her conduct is not thereby rendered improper or wrongful as a matter of law. Sharrow, 306 Md. at 765 , 511 A.2d at 498 .

No matter -with what intention a person may have acted, his or her conduct is not improper or wrongful if he or she had the right to cause the termination. Id. at 764 , 511 A.2d at 498 . One recognized “just cause for damaging another in his [or her] business is competition.” Natural Design, Inc., 302 Md. at 72 , 485 A.2d at 676 . See Gardiner Dairy Company, 107 Md. at 566 , 69 A. at 409 (“lawful competition must be sustained and encouraged by law”).

Thus, interference with another’s contract or business relations in the name of competition is improper only if the means used are, in themselves, improper. See Goldman, 150 Md. at 684 , 133 A. at 846 , in which we said: “Iron sharpeneth iron” is ancient wisdom, and the law is in accord in favoring free competition, since ordinarily it is essential to the general welfare of society, notwithstanding competition is not altruistic but is fundamentally the play of interest against interest, and so involves the interference of the successful competitor in the matter of their common rivalry. Competition is the state in which men live and is not a tort, unless the nature of the method employed is not justified by public policy, and so supplies the condition to constitute a legal -wrong. See Natural Design, Inc., 302 Md. at 72-73 , 485 A.2d at 676 .

See also Restatement (Second) of Torts § 768 (“Competition as Proper or Improper Interference”). Subsection (1) of that section provides: (1) One who intentionally causes a third person not to enter into a prospective contractual relation with another who is his competitor or not to continue an existing contract ter ³⁰³ minable at will does not interfere improperly with the other’s relation, if (a) the relation concerns a matter involved in the competition between the actor and the other and (b) the actor does not employ wrongful means and (c) his action does not create or continue an unlawful restraint of trade and (d) his purpose is at least in part to advance his interest in competing with the other. When the existing contract is not terminable at will, inducing its breach, even for competitive purposes, is itself improper and, consequently, not “just cause” for damaging another in his or her business. DeWitt, 120 Md. at 394-95 , 87 A. at 932 ; Gardiner Dairy Company, 107 Md. at 564-65 , 69 A. at 408 ; Gore v. Condon, 87 Md. 368, 39 A. 1042 (1898); Walker v. Cronin, 107 Mass. 555 (1871).

As Gardiner Dairy Company, 107 Md. at 564 , 69 A. at 408 , noted: It cannot be denied that it is unlawful for a party to a contract to break it, unless, of course, he has sufficient ground for doing so, and therefore when a third party procures or induces him to do so, he is causing him to do an unlawful act, which is itself unlawful, and the law ought to afford a remedy to the injured party. This is true even though the defendant purports to act in the interest of legitimate competition. DeWitt, 120 Md. at 395 , 87 A. at 932 ; Gardiner Dairy Company, 107 Md. at 566 , 69 A. at 409 . The rationale for this rule is set forth in Walker v. Cronin, 107 Mass. 555, 564 (1871): Everyone has a right to enjoy the fruits and advantages of his own enterprise, industry, skill and credit.

He has no right to be protected against competition; but he has a right to be free from malicious and wanton interference, disturbance or annoyance. If disturbance or loss, as a result of competition or the exercise of like rights by others, it is ³⁰⁴ damnum absque injuria, unless some superior right by contract or otherwise is interfered with. See Restatement (Second) of Torts § 768(2), which provides: The fact that one is a competitor of another for the business of a third person does not prevent his causing a breach of an existing contract with the other from being an improper interference if the contract is not terminable at will. Thus, where there is an existing contract, not terminable at will, between a plaintiff and a third party, acts by a defendant to induce the third party to breach that contract are, themselves, improper and wrongful.

It follows, therefore, that “[p]rocuring a breach of contract is an actionable wrong unless there be justification for interfering with the legal right.” Gardiner Dairy Company, 107 Md. at 566 , 69 A. at 409 , quoting South Wales Miners Federation v. Glamoyan Coal Company, A.C. 239 (1905). The situation is entirely different when the existing contract is one terminable at will or at the option of the party importuned. Where the contract is one terminable at will by the party who refuses to continue performance, there is a broader right to interfere, Natural Design, 302 Md. at 69-70 , 485 A.2d at 674 . See Harris v. Hirschfeld, 13 Cal.App.2d 204 , 56 P.2d 1252, 1253 (1936) (no cause of action lies against a third person who induces another to terminate a partnership at will), because competition in that case may, indeed, provide legitimate justification for the inducement.

Cf Restatement (Second) of Torts § 768. Where the decision whether to terminate or continue a contract with the plaintiff rests solely in the discretion of the third party, it is not improper or wrongful conduct for one in competition with the plaintiff to provide that third party with a reason for exercising his or her discretion. See Mac Enterprises, Inc. v. Del E. Webb Development Co., 132 Ariz. 331 , 645 P.2d 1245, 1250 (Ariz.App.1982) (no tortious interference where landlord had right to cancel its lease with tenant). No matter with what motive or intention a defendant may have acted, it cannot be said in that situation, that he or she acted improperly or wrongfully so long as he or ³⁰⁵ she was legitimately competing for the subject of the contract.

Memorial Gardens, Inc. v. Olympian Sales & Management Consultants, Inc., 690 P.2d 207, 211 (Colo.1984); Mulei v. Jet Courier Service, Inc., 739 P.2d 889 (Colo.App.1987), rev’d in part and affd in part, 771 P.2d 486 (Colo. (1989) (competitor who intentionally causes third person not to continue an existing contract terminable at will does not improperly interfere with contractual relations if no wrongful means are employed). But see La Rocco v. Bakwin, 108 Ill.App.3d 723 , 64 Ill.Dec. 286, 292 , 439 N.E.2d 537, 543 (1982) (cause of action for intentional interference with business relationship exists where defendant interfered with relationship between attorney and client, even though relationship is terminable at will). Although an action in tort lies for intentional interference with contractual relations, if the contract is terminable at will, there is no legal assurance of future performance; thus a competitor who intentionally causes a third person not to continue an existing contract terminable at will does not improperly interfere with the contractual relation if no wrongful means are employed.

Mulei, 739 P.2d at 893 ; Harris v. Hirschfeld, 56 P.2d at 1253 . Indeed, it is even questionable whether, in that circumstance, the defendant can even be said to have induced the termination of the contract; it is expected that one with the option to do so, will terminate a contract when presented with good reasons for doing so. See Cunningham, 264 Md. at 658 , 288 A.2d at 162 . Presenting a party with the right to terminate a contract at its sole option with a reason for doing so is very close to the scenario which we held in Gardiner Dairy Company was not an example of “unlawful means”: ... [A] party may be the means of causing the contract to be broken, and still not be liable.

To illustrate, A may advertise his goods for sale at such a low rate as to result in a breach of contract by B, who was under contract with C, to buy at a higher price, but that would not make A liable to C, or to make the