In order to maintain a claim for tortious interference with contract, a business must prove that the bad actor induced a third party to breach the agreement, something which cannot be inferred merely because the third party simply breaches the contract. Southeast Anesthesiology Consultants, PLLC v. Rose, et al., 2019 NCBC 51 (J. Robinson). As a result, the plaintiff could not maintain its tortious interference claim where it alleged no facts that showed the defendant induced a third party to terminate its agreement with the plaintiff.
In 2010 Greensboro Anesthesia Physicians, LLC (“GAP”) was the exclusive provider of anesthesiology services to Moses H. Cone Memorial Hospital (“Hospital”) pursuant GAP’s agreement with Cone Health, which operated the Hospital (the “Cone Agreement”). At that time, Plaintiff Southeast Anesthesiology Consultants, PLLC (“SAC”) purchased all of the stock in GAP and thereby obtained the rights to the Cone Agreement. Plaintiff Mednax Services, Inc. (“Mednax”) provided medical practice management services for SAC pursuant to a management services agreement (“MSA”). After acquiring GAP, SAC had a number of the GAP’s anesthesiologists become employees of SAC, signing employment agreements that contained non-competition and non-solicitation provisions that lasted through October 31, 2017. In the months leading up to the expiration of the employment agreements in 2017, SAC and a number of individual physicians (“Departing Physicians”) could not reach terms on extending their employment agreements. SAC suggested to Cone Health that it would find new anesthesiologists to replace the Departing Physicians, and thereafter sought out anesthesiologists from around the country to enter into employment agreements with SAC (“Potential Physicians”). According to the complaint, Cone Health voiced no objections to SAC’s staffing proposal until when, just days before the employment agreements were scheduled to expire, Cone Health unexpectedly rejected SAC’s proposal to use the Potential Physicians and instead claimed that SAC had breached the Cone Agreement by its failure to properly staff the Hospital with qualified anesthesiologists. After the Departing Physicians started new companies (“Physician Companies”), Cone Health entered into exclusive agreements with the Physician Companies to staff the Hospital, thereby excluding all SAC physicians from the Hospital. As a result of Cone Health’s exclusion of the SAC physicians, SAC was unable to satisfy its obligations to Mednax under the MSA. Similarly, the Potential Physicians refused to enter into employment agreements with SAC since they would not be able to work at the Hospital. SAC and Mednax sued, and Cone Health sought to dismiss, inter alia, their claim for tortious interference with contract and prospective business relations.
The Business Court agreed, finding that to maintain a claim for tortious interference with a contract or with a prospective business relation, a plaintiff must prove that the defendant’s actions induced a third party to breach an existing contract or refuse to enter into a prospective contract. In its complaint, the Business Court found that Mednax had failed to allege sufficient facts to show that Cone Health had induced SAC to breach the MSA. In dismissing the tortious interference with contract claim, the Business Court held the mere fact that a breach occurred as a result of Cone Health’s actions was not sufficient under North Carolina law to show that Cone Health had induced SAC to breach. Similarly, although Cone Health’s termination of the Cone Agreement prevented SAC from entering into agreements with the Potential Physicians, the Business Court nonetheless held that SAC had failed to allege facts sufficient to show that Cone Health had induced the Potential Physicians to refrain from entering into contracts with SAC. Such lack of inducement was fatal to both claims.
Based upon this result, any business which believes a potential defendant has interfered with its contracts or prospective contracts will need to be prepared to show that the bad actor induced the other businesses to either breach the existing agreement or refuse to enter into a prospective agreement.
Additional legal points of interest:
- North Carolina law recognizes that while a breach of contract and the breach of the implied covenant of good faith and fair dealing can be based on the same actions, the claims will rise and fall with one another but are not exclusive of one another. (Opinion, ¶43).
- While a civil conspiracy requires an underlying bad act, the act relied upon need not be the particular defendant’s action but can be the action of a co-conspirator. (Opinion ¶ 72).
- The claim of civil conspiracy allows the admissions and actions of one conspirator to be admissible against all the conspirators. (Opinion, ¶ 70).
- Dismissing a claim of civil conspiracy summarily is difficult because such claim is usually broadly stated. (Opinion, ¶ 73).
Categories: Key Business Court Decisions