Lead Opinion
International Sales & Service, Inc. (“ISS”) sued Austral Insulated Products, Inc. (“Austral”) for tortious interference with an advantageous business relationship. After the jury returned a verdict for ISS, the district court entered judgment as a matter of law for Austral. We affirm.
I.
ISS was a distributor of, and manufacturer’s representative for, various products, principally aviation wire. In 1990, ISS began providing aviation wire to Shannon Aircraft Motorworks, later renamed Shannon Ireland and Shannon Canada (together, “Shannon”). Construing the facts in the light most favorable to thе non-moving party, ISS was the sole distributor of aviation wire to Shannon from 1990
To fill orders from Shannon, ISS obtained wire from Austral, a manufacturer of insulated wire. ISS did not have a written distributorship agreement with Austral. ISS used a freight forwarder to prevent Austral from discovering the identity of ISS’s clients and selling directly to them. Austral dealt with its customers on a “quote by quote” basis, without any formalized relationships. Under this system, customers сalled Austral and received a quote for the purchase price of wire. Between 1989 and 1993, Austral’s clients included a major distributor, several smaller distributors such as ISS, and end-users.
In 1993, Austral changed course and entered into exclusive distributorship agreements with distributors in Canada and the United States. As part of its new relationship with its American distributor, Electrical Insulation Suppliers (“EIS”), Austral agreed to end its relationships with other independent distributors in the United States and to instruct its direct customers that orders within the continental United States would have to be placed with EIS. In 1995, Austral stated that it would no longer sell wire to ISS unless ISS disclosed the identity of its customers. ISS initially refused, but agreed when Austral promised not to use the information to sell directly to ISS’s clients. After obtaining ISS’s client information, Austral contacted Shannon directly. Austral then stopped selling wire to ISS, leaving ISS unable to fill subsequent orders from Shannon. ISS and its sole employee and shareholder, German Bravo, went bankrupt.
On January 14, 1998, ISS sued Austral in Florida state court for tortious interfеrence with an advantageous business relationship. After Austral removed the case to federal district court based on diversity jurisdiction, a jury heard the action from August 10-12, 1999, and returned a verdict for ISS. The district court then entered judgment as a matter of law in favor of Austral under Federal Rule of Civil Procedure 50(b). The district court held that ISS failed to show an advantageous business relationship, and, alternatively, that the privilege of competition justifies any interference by Austral in the ISS-Shannon relationship. ISS аppeals.
II.
We review the district court’s grant of summary judgment de novo. Ross v. Rhodes Furniture, Inc.,
A. Existence of a Business Relationship
The district court held that ISS failed to demonstrate a business relationship with Shannon. The court emphasized that nothing bound Shannon to buy wire from ISS, leaving Shannon free to take its business elsewhere. The court concluded that it found “no case that holds that a history of discrete sales is not [sic] sufficient to demonstrate an advantageous business relationship.”
In finding no business relationship between Georgetown and its past customers, the Florida Supreme Court distinguished Insurance Field Services, Inc. v. White & White Inspection & Audit Service, Inc.,
In Ferguson Transportation, Inc. v. North American Van Lines, Inc.,
In Dunn v. Air Line Pilots Ass’n,
In this case, ISS alleges a relationship with an identifiable customer, Shannon, whom ISS continually supplied with aviation wire from 1990 to 1995. Thus, we are not presented with a situation like Ethan Allen, where the plaintiff merely alleged a relationship with the community at large. Instead, this case is more similar to the relationship at issue in Insurance Field Services, where the plaintiff had ongoing relationships with sixteen clients.
Austral correctly notes that ISS did not establish a likelihood that its dealings with Shannon would be formalized in a written agreement. Austral points to the Ethan Allen court’s statement that, generally, a business relationship requires proof that an agreеment would “in all probability have been completed if the defendant had not interfered.”
Additionally, Austral points out that Ethan Allen requires proof of a “business relationship that affords the plaintiff existing or prospective legal or contractual rights.”
B. The Competition Privilege
The district court held that, even if ISS established a prima facie case of tortious interference, the privilege of competition justified Austral’s interference with the ISS-Shannon relationship. Florida law recognizes the right of competitors to compete for customers. Wackenhut Corp. v. Maimone,
The first issue we confront in determining whether Austral’s actions are protected by the privilege of competition is which party bears the burden of persuasion. The answer is far from clear. See Restatement (Second) of Torts § 767 cmt. k (1977) (stating that “there is little consensus on who has the burden of raising the issue of whether the interference was improper or not and subsequently proving that issue”). The traditional approach places the burden on thе defendant to establish justification or privilege for his conduct. See W. Page Keeton et al., Prosser and Keeton on the Law of Torts § 130 (5th ed. 1984). However, critics of this approach claim that placing the burden on the defendant to show justification for his actions “requires too little of the plaintiff’ because “[t]he major issue in the controversy — justification for the defendant’s conduct — is left to be resolved on the affirmative defense of privilege.” Leigh Furniture & Carpet Co. v. Isom,
One treatise suggests that a Florida court has adopted the modern Restatement approach. See Prosser and Keeton on the Law of Torts § 130 (citing Lake Gateway as placing the burden on the plaintiff to show the defendant’s interference as improper). However, in Unistar Corp. v. Child,
stand[s] for the rule that a showing of an intentional and unjustified interference with an existing business relationship which causes damage to the plaintiff establishes a prima facie case, and that the burden then shifts to the defendant to justify that interference. If the defendant can prove that the interference was lawful competition ... the defendant will not be found to have committed the tort of wrongful business interference.
Id. at 734-35. Thus, the Unistar court apparently places the burdеn on the plaintiff to show “unjustified” interference, but then requires the defendant to prove that the interference was “lawful.” Id.; see also Ethan Allen,
To establish the cоmpetition privilege, Austral must show that: (1) the ISS-Shannon relationship concerned a matter involved in the competition between Austral and ISS; (2) it did not employ improper means; '(3) it did not intend to create or continue an illegal restraint of competition; and (4) its purpose was at least in part to advance its interest in competing with ISS. Restatement (Second) of Torts § 768(1) (1977). Whether interference with a business relationship is privileged “depends upon a balancing' of the importance ... of the objective advanced by the interference against the importance of the interest interfered with, considering all circumstances among which the methods and means used and the relation of the parties are important.” Heavener, Ogier Servs., Inc. v. R.W. Florida Region, Inc.,
In this case, Austral promised ISS that it would not sell directly to ISS’s customers if ISS told Austral the identity of its customers. However, Austral subsequently broke that promise and sold directly to Shannon. The factual similarities between this case and Royal Typewriter compel us to agree with Austral that its actions are justified by the competition privilege.
In arguing that the competition privilege does not protect Austral’s actions, ISS directs our attention to case law outside Florida. See Monette v. AM-7-7 Baking Co.,
III.
We AFFIRM the district court and hold that Austral’s actions are justified by the privilege of сompetition.
Notes
. The dissent notes that a Florida intermediate appellate court has stated: "The question of whether an action is privileged is a jury question." Monco Enters., Inc. v. Ziebart Corp.,
Concurrence Opinion
concurring in part and dissenting in part.
I concur with the majority’s decision to assume that the burden is on Austral to justify its interference with the ISS-Shannon relationship. I also concur with their decision to assume that ISS had a “business relationship” with Shannon; indeed, I would find that there was an existing busi
In Florida, when a plaintiff pleads and proves a prima facie case for tortious interference, the burden is on the defendant to avoid liability by showing his action is privileged or justified. See Monco Enterprises, Inc. v. Ziebart Corp.,
Florida law generally recognizes the right of a business entity to compete for customers. See Royal Typewriter Co. v. Xerographic Supplies Corp.,
There was sufficient evidence for the jury to find that Austral’s actions were not justified by a competition privilege. The jury heard testimony that Austral’s national sales manager, Chris Pavlick, told ISS’s sole shareholder and employee, German Bravo, that in order to place future orders with Austral, ISS would have to provide the names of its customers. When Bravo refused to name his customers and expressed his concern that Austral might “go around” him, Pavlick assured him that such conduct would be “abominable” and that Austral would never do it. Austral then contacted Shannon directly and stopped selling wire to ISS. ISS was then unable to fill orders, and eventually went bankrupt.
In overturning the jury’s verdict for the plaintiff, the district court and the majority substitute their own views that Austral’s actions were justified by a competition privilege for the jury’s determination that Austral’s actions were not justified. The district court improperly overturned a jury verdict on a question Florida law reserves for the jury. Viewing the facts in the light most favorable to the appellant, there is sufficient evidence for the jury to have found as it did. We should hesitate to allow district courts to throw out jury verdicts when those verdicts are based on determinations left to a jury under state law and are supported by sufficient record evidence. I respectfully dissent.
