• When Competition Goes Too Far - Limits on Advancing Business Interests
  • March 10, 2015 | Author: John Paul Nefflen
  • Law Firm: Burr & Forman LLP - Nashville Office
  • Most business owners agree that “competition is the bedrock of capitalist economies . . . the presence of multiple buyers and sellers competing with each other in active markets is one of the defining features of capitalism.”[1] But are there limits on how businesses can compete with each other in the market place? The Tennessee Court of Appeals recently answered that question in the affirmative when it found a business owner liable for unlawfully interfering with his competitor’s business and contractual relationships to gain a competitive advantage.

    In Tennison Brothers, Inc. v. Thomas[2] the court settled a decade-long business dispute arising out of the placement of a billboard. The plaintiff, Tennison, owned a piece of property which he leased to Clear Channel Outdoor (“CCO”) for the purpose of erecting a billboard. Tennison’s lease with CCO was lucrative, lasting for 20 years. The defendant, Thomas, owned property adjacent to Tennison’s and, like Tennison, sought to lease his property for the placement of a billboard. Under state and county regulations, however, only one billboard could be erected between the two properties.

    Without receiving the proper permits, Thomas erected a billboard on his property which prevented CCO from erecting a billboard on Tennison’s property. As a result, Tennison breached his lease agreement with CCO and lost 10 years of CCO’s rental payments. Tennison sued Thomas for interfering with his business relationship with CCO and causing him to breach his contract with CCO. Thomas asserted he was simply advancing his own business interests.

    In Tennessee, a person may be liable for intentionally interfering with another’s business relations when he acts with an improper motive or by improper means. The difficulty in any case involving business competitors is identifying improper motives and improper means. As Thomas argued, his motive for erecting his billboard was to advance his own business interests. Competition, which is at the heart of our economy, almost always requires one’s benefit to be at the disadvantage of another. Because of the state and county billboard regulations, Thomas’ business interest in erecting a billboard could only be advanced at the detriment of Tennison’s business interests.

    The Tennison Court recognized the need for competition, but drew the line when Thomas advanced his business interests through illegal means. The court found that Thomas illegally constructed the billboard on his property because he did not have the requisite permits, and he did so to prevent CCO from constructing its billboard on Tennison’s property. Thomas was not liable for his competitive motive, but for the illegal means he used to advance his business interests.

    For the same reasons, the court ruled that Thomas unlawfully interfered with Tennison’s lease with COO and caused Tennison to breach the contract. Thomas’ illegal billboard, not his competitive motive, caused Tennison to breach his contract with CCO. As the court commented in another decision, “the competitor’s privilege does not apply to prevent liability based on wrongful means, methods, or conduct.”[3]

    The tort of “intentional interference with a business relation” has been around for many years. The Tennessee Supreme Court expressly adopted it in 2002[4] stating that, “[e]very one has the right to establish and conduct a lawful business, and is entitled to the protection of organized society, through its courts, whenever that right is unlawfully invaded. Such right existing, the commission of an actionable wrong is established against any one who is shown to have intentionally interfered with it, without justifiable cause or excuse . . . .”[5]

    Whether a business competitor is liable for intentionally interfering with a business relationship is a very fact-specific question. In addition to violating a statute or regulation, as Thomas did, other improper competitive methods can include violence, threats or intimidation, bribery, unfounded litigation, fraud, misrepresentation or deceit, defamation, duress, undue influence, misuse of inside or confidential information, breach of a fiduciary relationship, and methods that violate established standards of a trade or profession or otherwise involve unethical conduct.[6]

    Our laws recognize the need for competition in the market place for a variety of reasons. But, “the law draws a line beyond which no member of the community may go in intentionally intermeddling with the business affairs of others . . . the line of demarcation between permissible behavior and interference reflects the ethical standards of the community.”[7] The court in Tennison Brothers, Inc. v. Thomas found that Thomas crossed that line when he pursued his legitimate business interests through illegal means.
    [1] Simons, Robert (2013) “The Business of Business Schools: Restoring a Focus on Competing to Win,” Capitalism and Society: Vol. 8: Iss. 1 , Article 2.

    [2] 2014 WL 3845122 (Aug. 6, 2014).

    [3] Watson’s Carpet & Floor Covering, Inc. v. McCormick, 247 S.W.3d 169, 185 (Tenn. Ct. App. 2007).

    [4] See Trau-Med of America, Inc. v. Allstate Ins. Co., 71 S.W.3d 691, 701 (Tenn. 2002).

    [5] Trau-Med of America, 71 S.W.3d at 698 (quoting Hutton v. Watters, 179 S.W.134, 135 (Tenn. 1915)).

    [6] Id. at 701 n.5.

    [7] Id. at 701-02 (citing City of Rock Falls v. Chicago Title & Trust Co., 300 N.E.2d 331, 333 (1973)).