Consultant panning contractor was not 'improper' interference with lucrative reno deal, court holds

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An architect whom homeowners hired to review their bills in multimillion-dollar renovation did not tortiously interfere with the reno contract when he advised them to terminate and hire another contractor, the Massachusetts Appeals Court held yesterday.

The devil in the details here is the element "improper" in the tort of interference. The same element, or the same concept, lives at the heart of many a business tort, and it's a difficult line to find. Indeed, the Appeals Court wrote that "improper" "has proved difficult to capture in a universal standard."

Interference with contract in Massachusetts law requires a contract or prospective business relation, knowing inducement to break the contract, interference by "improper motive or means," and harm to the plaintiff as a proximate result. Here, the architect told the homeowners they were being overbilled and urged them to terminate the renovation contract and hire a contractor the architect recommended. They did, and the terminated contractor sued the architect for interference with contract.

The fact pattern is common for generating interference claims, as the very job of the defendant is, in a sense, interference, that is, to run interference between consulting client and its contractor. Only "improper" was in dispute, and the plaintiff-contractor could not show evidence that measured up.

The plaintiff disputed the veracity and quality of the defendant's consultation and advice. But worst case, the court reasoned, the plaintiff might persuade a jury to find negligence or gross negligence. That can't be the basis of an interference claim, because then the interference tort would make actionable every negligent infliction of economic loss. 

The negligence tort usually requires a physical infliction of loss or harm. Business torts are exceptional in this regard, but they are predicated on a strong duty relationship, such as contract or fiduciary obligation. The plaintiff-architect and defendant-contractor here were not in privity of contract.

The court looked to an earlier case in which the Massachusetts Supreme Judicial Court had allowed interference predicated on deceit or intentional misrepresentation. That can suffice to support interference. But there was no evidence here of deceit. So the court pondered what improper means short of that standard.

The court leaned heavily on the Second Restatement of Torts, which suggested, besides deceit, threats, defamation, or other conduct "innately wrongful, [and] predatory in character." Inversely, the Second Restatement advises that no interference liability can arise from "truthful information" or "honest advice within the scope of a request for advice."

The latter standard fit, the court opined. And the Restatement comments elaborated, "[N]o more than good faith is required," regardless of competence. "The rule as to honest advice applies to protect the public and private interests in freedom of communication and friendly intercourse," affording latitude especially to "the lawyer, the doctor, the clergyman, the banker, the investment, marriage or other counselor, and the efficiency expert."

The court affirmed the superior court award of summary judgment to the defendant.

There's unfortunately one point of confusion reiterated in the court's opinion. The court correctly pointed to a line of Massachusetts cases approving of "actual malice" as supporting interference claims in the context of employment, when a disgruntled terminated worker claims interference against a supervisor or corporate officer for interfering with the worker's employment contract. In this context, the courts defined "actual malice" as "spiteful, malignant purpose unrelated to a legitimate corporate interest."

Common law malice

That's not what "actual malice" means, at least in the civil context. "Actual malice" generally is a stand-in for reckless indifference and is distinguishable from "common law malice," which represents spite, ill will, or hatred. It's been observed many times that "actual malice" is unfortunately named, and it would be better had there been a different term from the start. Common law malice can be evidence of actual malice, but certainly is not required. The difference can be confusing to jurors.

The Massachusetts precedents on interference in the employment context seem to have misused the term "actual malice" to refer to common law malice. OK, I guess, as long as we all know that malevolence is the one that can evidences tortious interference.

I have some doubts, by the way, about the correctness of the Massachusetts cases that apply the interference tort in fact patterns involving a fellow worker as defendant. A basic rule of interference is that one cannot be said to have interfered tortiously with a contract to which one is a party. If the defendant was clearly acting within the scope of employment, that is, as an agent of the employer, then I don't see that a tortious interference claim can arise, and there's no need to analyze impropriety. But then, I guess, the threshold requirement overlaps with the "unrelated to a corporate legitimate interest" piece of the impropriety test.

The case is Cutting Edge Homes, Inc. v. Mayer, No. 23-P-388 (Mass. App. Ct. Feb. 27, 2024) (temp. slip op. posted). Justice John C. Englander wrote the opinion of a unanimous panel that also comprised Justices Ditkoff and Walsh.

Tort-contract distinction cannot block damage multiplier, Mass. high court holds in lease dispute

Photo by Yonkers Honda CC BY-SA 2.0 via Flickr

A landlord may not rely on a limitation-of-liability provision in a commercial lease to evade a damage multiplier under Massachusetts consumer protection law, the Supreme Judicial Court ruled in January, regardless of whether the case is characterized as tort or contract.

The dispute arose between plaintiff-tenant Majestic Honda and its LLC landlord, owned by Alfredo Dos Anjos. Majestic accused the defendant of bad-faith lease termination, and the trial court agreed.

Massachusetts General Laws chapter 93A, under which Majestic brought its case, is a famously potent statutory remedy. Ostensibly its section 11 is a consumer protection law like any of the unfair trade practices prohibitions found throughout the states. But the statute has been read broadly in Massachusetts to operate at or beyond the margins of what lawyers usually regard as "consumer protection."

Moreover, section 11 authorizes double and treble damage awards upon "willful or knowing" misconduct. Massachusetts does not recognize punitive damages at common law, only by statute. Chapter 93A also has a four-year statute of limitations, sometimes an advantage to plaintiffs over the usual Massachusetts limitations period of three years for most tort actions.

Thus, as a result of permissive construction and powerful incentives for plaintiffs, chapter 93A is invoked frequently in what would be merely common law tort cases in other states, even to the exclusion of the common law claim in Massachusetts. Chapter 93A also is used in public enforcement, as in the Attorney General's present litigation to hold Big Oil accountable for climate change.

Tort and contract claims can be subsumed into the same 93A framework, blurring the classical distinction. The distinction is especially weak in product liability cases, in which Massachusetts plaintiffs almost always rely on 93A, in part because the commonwealth has recognized strict product liability as an extension of quasi-contractual warranty rather than as an evolution of common law negligence.

I am not a Massachusetts lawyer, and I am careful to disclaim to my 1L torts students that I am not well versed in 93A practice. It is its own field and cannot be folded into tort fundamentals. But, I admonish, they should endeavor to learn more if they intend to practice tort litigation in Massachusetts. My supremely talented colleague Professor Jim Freely once regularly taught a 93A course, but I don't think it's been offered since he was drafted (no pun intended) into the legal skills program.

Insofar as section 93A's damage multiplier is punitive in nature, it should not be disclaimable by a tort defendant, else the legislature's intended deterrent effect would be rendered moot. Upon this logic, the Massachusetts Appeals Court looked in past cases to discern whether the plaintiff's claim analogized more closely to tort or contract, to determine whether a limitation-of-liability provision should be allowed to nullify extraordinary statutory damages.

In fairness to the Appeals Court, the Supreme Judicial Court did roughly the same thing in 2018 when it applied a statute of repose for tort claims arising from real property to a 93A action, even though 93A itself has no repose period; three justices dissented from that ruling.

Here, the analogical approach is wrong, the Supreme Judicial Court decided unanimously. The court wrote, per Justice Scott Kafker, "Because G. L. c. 93A establishes causes of action that blur the distinction between tort and contract claims, incorporating elements of both, we do not adopt this formulation." The court further explained,

Our cases have also pointed out that a c. 93A claim is difficult to pigeonhole into discrete tort or contract categories, as c. 93A violations tend to involve elements of both tort and breach of contract, blurring the lines between the two. As we explained in [prior cases], "[t]he relief available under c. 93A is 'sui generis,'" being "neither wholly tortious nor wholly contractual in nature." Hence, a "cause of action under c. 93A is 'not dependent on traditional tort or contract law concepts for its definition.'"

After all, the court reasoned, the legislative intention to deter willful or knowing misconduct is not a function of whether the wrong is a tort or a breach of contract.

At a theoretical level, the vast gray area of 93A in Massachusetts law might have broader implications for the classical distinction between tort and contract, namely, whether the distinction will or should persist at all in contemporary common law. Massachusetts 93A practice might prove instructive as courts in many common law jurisdictions, such as Canada, reconsider the vitality of the so-called "economic loss rule," a historic marker of the tort-contract distinction that forbade tort actions in the absence of physical injury or damage.

The case is H1 Lincoln, Inc. v. South Washington Street, LLC, No. SJC-13088 (Mass. Jan. 24, 2022).

Intimate large parties and the duty to protect privacy

I had to take a blog break over the holidays in order to get a hefty book read and to write a review of it.  I’ll post on that when it comes closer to publication.  Meanwhile, my, how the world has changed!  Let me kick off the new year with a look at some related developments in privacy law.

As Marion Oswald of the University of Winchester wrote recently for the journal of Information Communication & Technology Law (open source), to paraphrase, privacy ain’t what it used to be.  Oswald opened with a quote from The Great Gatsby, so it goes without saying that that needs to be reiterated here.  She wrote,

At one of the Great Gatsby’s spectacular parties, the golf champion Jordan Baker remarked to Nick Carraway that she likes large parties: “They’re so intimate. At small parties there isn’t any privacy.”

From that paradox, Oswald builds the case that privacy must be redefined to protect individuals in the digital world.  She observes the inadequacy of the “reasonable expectation of privacy” (REP) test—the U.S. Fourth Amendment standard—given the objective test’s tendency to drive itself to extinction in a world of objectively diminishing privacy.  Kade Crockford with the ACLU of Massachusetts articulates this point brilliantly in her lectures.  Oswald is not the first to reach her conclusion, but she does so compellingly.

Two recent cases, from Pennsylvania and Massachusetts, reached different conclusions on the question of a corporate defendant’s duty to safeguard private data.  The cases show the struggle under way in U.S. courts to do just what Oswald proposed—to redefine privacy in the digital age.  The United States is increasingly at odds with Europe, and for that matter the rest of the world, on this question.  Heralded as a modern human right in Europe, data protection is a burgeoning global legal field—and corporate obligation.

Duty

First, a quick primer on duty in U.S. tort law.

Tort law in the United States usually provides for a “duty” by “default” in negligence—that is, all persons owe to all other a persons a duty to exercise reasonable care (or not to act negligently), to avert harm to all others.  But the default rule of duty is subject to some important limitations.   

One limitation is the economic loss rule, which circumscribes negligence liability.  The rule precludes a plaintiff’s action for nonphysical, economic injury alone.  There are plenty of exceptions to the rule, and some scholars even think it’s not really a rule at all.  For example, negligent misrepresentation, which is like fraud but without intent, can be supported by economic loss within the context and expectations of a business relationship.

Defamation and privacy torts can generate what looks like economic injury, but really are animated by their own, sui generis classes of damages to reputation and personality.  U.S. privacy torts push in the European direction, but generally do not protect data voluntarily disclosed to third parties, such as employers and banks—a relation of the REP problem.  That means no protection in privacy torts for financial data, even though it’s the stuff of identity theft.

The other limitation on duty by default is that U.S. law imposes no affirmative duty to protect, or to render aid.  This rule, too, is subject to many exceptions, such as a parent’s duty to protect a child, contractual and statutory duties to protect, and a duty not to abandon a rescue undertaken.

Here like in privacy law, European legal codes diverge from U.S. common law with a greater willingness to impose affirmative duty.  In the United States, the affirmative-duty limitation also can relieve a corporate entity of a duty to safeguard data when the injury to the plaintiff is caused much more immediately by an intervening bad actor, such as the hacker or identity thief.  (The problem in proximate causation is integrally related.)

So on to the cases.  Remember, "[i]t takes two to make an accident."

Pennsylvania

A January 12 Pennsylvania court decision, Dittman v. UPMC (Leagle) held that an employer had no duty to safeguard employees’ private information on a workplace computer.  (Hat tip to Richard Borden at Robinson + Cole.)  University of Pittsburgh Medical Center (UPMC) employees numbering 62,000 alleged disclosure of personal information in a data breach, resulting in the theft of identities and of tax refunds.

The court applied a five-factor test for duty: 

1. the relationship between the parties;

2. the social utility of the actor's conduct;

3. the nature of the risk imposed and foreseeability of the harm incurred;

4. the consequences of imposing a duty upon the actor; and,

5. the overall public interest in the proposed solution.

UPMC prevailed in common pleas and superior courts, the latter 2-1, arguing that it owed no duty to protect the plaintiff’s interests.  On the affirmative duty question, the court pointed to attenuated causation and professed willingness to defer to the state legislature.  As summarized by Brian J.Willett for the Reed Smith Technology Law Dispatch: 

The Superior Court observed that the social utility of electronic information storage is high, and while harm from data breaches is foreseeable, an intervening third party stealing data is a superseding cause.

Additionally, the Court explained that a judicially created duty of care would be unnecessary to motivate employers to protect employee information, as “there are still statutes and safeguards in place to prevent employers from disclosing confidential information” in addition to business considerations.

Finally, the Court agreed with the trial court’s conclusion that creating a duty in this context would not serve the public interest; rather, it would interrupt the deliberative legislative process and expend judicial resources needlessly.

The court then bolstered its conclusion by pointing to the economic loss rule as well. 

Massachusetts

Just before the holiday break in December, a Massachusetts Appeals Court also decided a case in which the plaintiff alleged an employer’s negligence in safeguarding private data—though the plaintiff was a client of the employer rather than an employee.

The facts recited by the court in Adams v. Congress Auto Insurance Agency, Inc. (Justia), have the makings of a docudrama.  According to the court, Thomas was fleeing police at high speed when he crashed his car into Adams's.  Thomas was driving the car of his girlfriend, Burgos, so Adams claimed against Burgos’s auto insurance.  Meanwhile Burgos was both customer and customer service manager of defendant insurance agency Congress.  She reported her car stolen and filed her own insurance claim. 

Adams could identify Thomas.  So Burgos used her computer access at work to identify Adams and passed his identity to Thomas.  Thomas then phoned Adams, impersonated a state police officer, and threatened Adams: “‘Shut the F up and get your car fixed or you will have issues,’” the court purported to quote.  Though I bet Thomas didn’t say just “F.”

Adams sued Congress on multiple theories, including negligent failure to safeguard private data.  At the trial level, according to the appeals court, “the motion judge . . . rul[ed] that expert testimony was required to establish whether the agency owed a duty to Adams to safeguard his personal information, what that duty entailed, and whether the agency breached that duty.”

It’s odd that the motions judge sought expert testimony, because, as the appeals court aptly observed, duty is unique among the four elements of negligence—duty, breach, proximate cause, and injury—for being purely a question of law, guided by public policy.  Courts do not ordinarily hear expert testimony on what the law is.  The theory goes that figuring that out is the judge’s main job.  (Too bad, or being a law professor would be more lucrative.  I was gently tossed from the witness stand once when a lawyer made a valiant but futile attempt to squeeze me past the rule.)

Unlike the Pennsylvania Superior Court, the Massachusetts Appellate Court found its way to a legal duty.  The court held “that the agency had a legal duty to Adams, a member of a large but clearly defined class of third parties, to prevent its employee’s foreseeable misuse of the information that Adams provided to process his automobile insurance claim.”  Where the Pennsylvania court had pointed to statute to justify judicial restraint, the Massachusetts court pointed to state data breach law to show that the legislature had green-lighted legal duty (albeit "a single green light, minute and far away").

“Just as those with physical keys to the homes of others have a duty of reasonable care to preserve their security,” the Massachusetts court reasoned, “companies whose employees have access to the confidential data of others have a duty to take reasonable measures to protect against the misuse of that data.”  Indeed, the court cited a keys case as applicable precedent.  The court made no fuss over the rule of affirmative duty or the rule of economic loss.  In a discussion of causation, the court seemed content to resort to foreseeability on the facts.

Summary judgment for defendant Congress was vacated, and the case was remanded for trial.

Conclusion

Advocates who wish to block European-style data protection in the United States use the availability of state tort law remedies as one tool in the toolbox to argue that U.S. law already sufficiently safeguards personal data from both sides of the Atlantic.  That’s not true.  Not yet.

Data protection in the United States is confounded by the rules of affirmative duty and economic loss.  And that’s not bad; those rules exist for sound public policy reasons.  They also are excepted for sound reasons.

I’ve written before (e.g., here and here) that popular thinking and expectations with respect to individual privacy are converging in the United States and Europe, even if a legal bridge lags behind.  Common law negligence can be a vital building block of that bridge.  But it’s a work in progress.

“‘Don’t believe everything you hear, Nick.’”