Posted on December 21, 2018 in Business Law
In Walnut Street Associates, Inc. v. Brokerage Concepts, Inc., the Supreme Court of Pennsylvania held that the disclosure of truthful information regarding an employee does not constitute tortious interference. 20 A.3d 468 (Pa. 2011). In this matter, Plaintiff, Walnut Street Associates (“WSA”), provided insurance brokerage services and provided clients with health insurance benefits for their employees. Defendants, Brokerage Concepts, Inc. (“BCI”), were the third-party administrator of the employee benefit plan of Plaintiff’s client, Procacci Brothers Sales Corp. (“Procacci”). The issue in question arose when Procacci requested that BCI lower their service costs. When BCI informed Procacci that they would not meet the requested cost, Procacci decided to leave BCI and to hire a new insurance administrator. Upon hearing the news of Procacci’s departure, BCI contacted Procacci and informed them that they could not lower the costs because BCI was required to pay WSA a certain percentage of the proceeds from Procacci. Procacci was not aware that WSA was receiving such a high percentage, and thus, terminated their contract with WSA. WSA brought suit against BCI for tortious interference with contractual relations for their disclosure of WSA compensation under the contract.
In Pennsylvania, in order to succeed on a claim for tortious interference, the plaintiff must establish that (1) a contract or a prospective contract existed between the plaintiff and a third-party; (2) purposeful action by the defendant with the intent to harm the relationship between the parties to the contract; (3) The defendant’s action was improper; and (4) actual damages resulted from defendant’s interference.
In this matter, the Court was faced with determining whether BCI’s actions constituted tortious interference. There was no dispute that there was a contractual relationship between WSA and Procacci, and BCI interfered with that relationship, but in order to satisfy the elements of the claim, WSA had to establish that BCI’s actions were improper. In analyzing whether the actions by BCI were improper, the Supreme Court affirmed the Superior Court’s decision to adopt Section 772(a) of the Restatement (Second) of Torts, which provides that “there is of course no liability for interference with a contract or with a prospective contractual relation on the part of one who merely gives truthful information to another.” Furthermore, this disclosure of truthful information was not considered tortious even if the third-party requested the information or not. For this reason, the Supreme Court affirmed the Superior Court’s reasoning and ruled in favor of BCI.