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Am. Paper Recycling Corp. v. IHC Corp. - 707 F. Supp. 2d 114 (D. Mass. 2010)

Rule:

To state a claim for intentional interference with contractual relations, a party must demonstrate that: (1) he had a contract with a third party; (2) the defendant knowingly induced the third party to break the contract; (3) the interference, in addition to being intentional, was improper in motive or means; and (4) the plaintiff was harmed by the defendant's actions. Something more than intentional interference is required to make out the tort. An actual malice standard is a heightened burden placed on the plaintiff, and not an affirmative defense to be proved by the defendant. The legitimate advancement of one's own economic interests is never "improper" for purposes of a tortious interference claim. 

Facts:

American Paper Recycling Corporation (“APR”) is an Illinois corporation engaged in the business of purchasing waste paper and other paper products for recycling. IHC Corporation (“IHC”) is a subsidiary of Cinram (U.S.) Holdings, Inc. (“Cinram”). Cinram is the sole shareholder of IHC. Prior to the events giving rise to this litigation, Ivy (now IHC) was engaged in the business of manufacturing paper packaging for use in the media industry.  As a by-product of its manufacturing business, Ivy generated significant quantities of recyclable waste paper. APR paid Ivy an agreed rate based on the volume and quality of the waste paper. On November 6, 1990, Ivy and APR entered into a waste paper sales contract, under which Ivy agreed to sell all of its waste paper to APR. In return, APR provided Ivy with manufacturing equipment on generous terms. APR sued IHC for breach of contract and breach of the covenant of good faith and fair dealing. APR also sued a limited liability company ("the LLC") and defendant competitor for tortious interference with contractual relations. The parties filed cross-motions for summary judgment.

Issue:

Was IHC liable for breach of contract?

Answer:

No

Conclusion:

The Court held that IHC was not liable for breach of contract under the de facto merger exception to the successor liability doctrine because (1) it did not retain key members of the LLC's management team, (2) it kept none of the same officers or directors, (3) the purchase involved an arms-length exchange of cash and only a nominal interest in the corporation's parent, consisting of non-voting, non-transferable shares subject to the parent's unilateral redemption, (4) it discontinued many of the LLC's vendors, (5) it did not buy the real property at a certain plant, and (6) the LLC did not dissolve after the purchase. The mere continuation exception did not apply because there was no continuity of directors, officers, shareholders, or senior management. The competitor was not liable for tortious interference with contract because there was no plausible claim that it acted out of a motive to gratuitously inflict harm on APR, or in accepting a corporate opportunity for the benefit of its shareholders, acted with an improper motive or improper means.

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