Lewis v. Oregon Beauty Supply Co.
302 Or. 616, 733 P.2d 430 (1987)
Rule of Law:
An at-will employment contract can form the basis of a claim for intentional interference with an economic relationship, but a party to the contract cannot interfere with its own contract. For intentional infliction of severe emotional distress, the conduct must be an "extraordinary transgression of the bounds of socially tolerable conduct," and mere tolerance of another's misconduct or rude behavior is insufficient for liability.
Facts:
- Plaintiff began employment with Oregon Beauty Supply Company (OBSC) in 1980, initially handling shipping and receiving, then was promoted to a sales position responsible for Portland metropolitan area telemarketing.
- Plaintiff worked directly for Lawrence Stebbeds, the principal owner and manager of OBSC, while Scott Stebbeds, Lawrence's son, supervised the OBSC warehouse.
- In 1981, plaintiff and Scott Stebbeds began dating, but plaintiff subsequently decided to end the relationship to see other men, which caused Scott to become jealous.
- Scott reacted with hostility towards plaintiff at the workplace, harassing her by glaring, spreading rumors that she had given him a venereal disease, swearing at her, calling her a whore, searching her personal belongings, throwing things at her, refusing to cooperate with her job duties, intentionally slamming a door that hit her, and telling other employees she would not be working at OBSC much longer.
- Plaintiff complained to Lawrence Stebbeds about Scott's harassment on at least two occasions; Lawrence stated he would talk to Scott, but the harassment continued.
- Lawrence informed plaintiff that Scott would continue to work for OBSC and that plaintiff could quit if she liked, though he encouraged her to stay.
- Approximately six months after the harassment began, plaintiff asked Lawrence for one month off to search for other employment and requested that Lawrence keep Scott away from her; Lawrence responded by agreeing it would be best if plaintiff quit.
- Plaintiff subsequently resigned from her employment at OBSC.
Procedural Posture:
- Plaintiff filed claims against Scott Stebbeds, Lawrence Stebbeds, and Oregon Beauty Supply Company (OBSC) in trial court for intentional infliction of severe emotional distress and intentional interference with an economic relationship.
- At the close of plaintiff's case, the trial judge granted directed verdicts in favor of OBSC and Lawrence Stebbeds on the intentional infliction of severe emotional distress claim.
- The trial judge also granted OBSC a directed verdict on the intentional interference with an economic relationship claim.
- The jury returned a verdict against both Scott and Lawrence Stebbeds on the intentional interference with an economic relationship claim, awarding general and punitive damages.
- The trial court subsequently granted Lawrence Stebbeds' motion for a judgment notwithstanding the verdict (JNOV) on the interference claim, but denied Scott Stebbeds' similar motion.
- Plaintiff appealed the judgment notwithstanding the verdict in favor of Lawrence on the interference claim and the directed verdicts granted to Lawrence and OBSC on the emotional distress claim to the Oregon Court of Appeals.
- Defendant Scott Stebbeds cross-appealed to the Oregon Court of Appeals, challenging the denial of his motion for judgment notwithstanding the verdict on the interference claim and the constitutionality of the punitive damages award.
- The Court of Appeals upheld the jury verdict and punitive damages award against Scott on the interference claim, reinstated the jury verdict and punitive damages award against Lawrence on the same claim, affirmed the directed verdict on the interference claim with respect to OBSC, and reversed and remanded plaintiff's claims against Lawrence and OBSC for emotional distress.
- All three defendants (Scott Stebbeds, Lawrence Stebbeds, and OBSC) filed petitions for review to the Supreme Court of Oregon.
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Issue:
1. Does an at-will employment contract provide a sufficient basis for a claim of intentional interference with an economic relationship, and can a party to that contract be held liable for such interference? 2. Is an individual liable for intentional interference with an economic relationship when his hostile and harassing conduct at work intentionally causes the plaintiff to abandon her at-will employment? 3. Are an employer (Lawrence Stebbeds) or the employing company (OBSC) liable for intentional infliction of severe emotional distress where Lawrence tolerated his son's (Scott Stebbeds') harassing misconduct, but did not engage in active, outrageous conduct himself? 4. Is a punitive damages award for tortious conduct involving both expressive and non-expressive acts unconstitutional under Article I, section 8 of the Oregon Constitution when the defendant failed to request a jury instruction separating such conduct?
Opinions:
Majority - Campbell, J.
Yes, an at-will employment contract can form the basis of a claim for intentional interference with an economic relationship because it constitutes a valid and subsisting contractual relationship until terminated, and the parties to it have an interest in its integrity and security. The court affirmed Scott Stebbeds' liability for intentional interference, finding that he acted intentionally with knowledge that interference was substantially certain to occur and used improper means (physical and verbal intimidation, threats, defamation), which caused the plaintiff to abandon her employment. Discharge is not a necessary element of the tort; causing a plaintiff to abandon the relationship is sufficient injury. No, Lawrence Stebbeds is not liable for intentional interference with an economic relationship. There was insufficient evidence for a jury to infer Lawrence knew of Scott’s specific gross acts of conduct and the malicious motives behind them, which would be necessary to establish Lawrence’s intentional participation or acquiescence in a campaign to interfere with plaintiff’s employment. No, Oregon Beauty Supply Company (OBSC) is not liable for intentional interference with an economic relationship. A party to a contract, such as OBSC as the employer, cannot be liable for interfering with its own contract, as the tort requires interference by a third party with a relationship between the plaintiff and another entity. No, Lawrence Stebbeds and OBSC are not liable for intentional infliction of severe emotional distress. The court held that Lawrence’s actions, primarily his tolerance of his son’s misconduct, did not rise to the level of "some extraordinary transgression of the bounds of socially tolerable conduct." The behavior, while potentially rude or boorish, did not constitute the "cold-blooded oppressive browbeating" or extreme and outrageous conduct required for the tort, aligning with previous rulings that mere unpleasantness or rude behavior is insufficient. By extension, the corporation, acting through Lawrence, was also not liable. Yes, the punitive damages award against Scott Stebbeds is constitutional and valid. Scott's argument that the award infringed on his right of free expression under Article I, section 8 of the Oregon Constitution failed because some of his tortious acts (e.g., searching plaintiff's property, intentionally slamming a door) were non-expressive conduct. Since Scott did not request a jury instruction requiring the separation of expressive from non-expressive conduct for the purpose of punitive damages, the award was upheld.
Analysis:
This case is critical for clarifying the scope of intentional interference with economic relations, establishing that even at-will employment contracts are protected from third-party interference, but emphasizing that the employing entity itself cannot be sued for interfering with its own contract. It sets a high bar for proving intentional infliction of severe emotional distress, particularly in the employment context, requiring truly outrageous conduct beyond mere rudeness or an employer's failure to adequately address harassment. Furthermore, the decision limits employer liability for a subordinate's tortious acts based on acquiescence, demanding specific knowledge of the egregious conduct and underlying motives. The ruling also provides an important procedural point regarding punitive damages where free speech is implicated, requiring defendants to proactively seek instructions to distinguish between expressive and non-expressive conduct.
