Nesler v. Fisher and Co., Inc.
452 N.W.2d 191, 1990 WL 16856, 1990 Iowa Sup. LEXIS 47 (1990)
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Rule of Law:
Otherwise lawful actions, such as instituting litigation or lodging complaints with regulatory bodies, can constitute improper interference with existing or prospective contractual relations if the actor's primary motive is not to adjudicate a legitimate claim but to harass or inflict injury upon another's business.
Facts:
- Ferd Nesler purchased a building in Dubuque to renovate, lease to tenants, and syndicate by selling shares to investors.
- Nesler secured tentative commitments from twelve county agencies, who were current or potential tenants of defendants Fisher and Company, Inc., and Plastic Center, Inc., to move into his renovated building.
- After the county board approved the move, Louis Pfohl, president of the defendant corporations, became angry, stated Nesler would 'pay' for taking his tenants, and offered to bet supervisors that Nesler's project would fail.
- Pfohl repeatedly visited Nesler's construction site and the city building department to pressure the building inspector, causing delays in the project.
- Pfohl encouraged and arranged for one of his own tenants, Handicapped Persons, Inc., to file a lawsuit against Nesler regarding building access, with Pfohl's attorney providing the legal services free of charge.
- The combination of lawsuits, inspections, and resulting negative publicity caused potential investors and the Dubuque Bank and Trust to withdraw financial support for Nesler's project.
- Lacking financing, Nesler was forced to deed his equity in the building to the bank, resulting in the loss of his investment and potential future profits.
Procedural Posture:
- Ferd Nesler sued Fisher and Company, Inc., and Plastic Center, Inc., in an Iowa district court (trial court) for interference with business contracts.
- A jury returned a verdict in favor of Nesler, awarding him $576,476 in compensatory damages and $100,000 in punitive damages.
- The defendants filed a motion for judgment notwithstanding the verdict (JNOV) and a motion for a new trial.
- The district court granted the defendants' motion for JNOV, setting aside the jury's verdict due to insufficient evidence.
- Nesler, as appellant, appealed the district court's grant of the JNOV to the Supreme Court of Iowa.
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Issue:
Does a defendant's use of otherwise legal actions, such as filing lawsuits and lodging complaints with government inspectors, constitute improper interference with another's existing and prospective contractual relations if those actions are motivated by bad faith or a desire to harass?
Opinions:
Majority - Justice Larson
Yes. A defendant's use of otherwise legal actions constitutes improper interference if motivated by bad faith or a desire to harass. The court reversed the judgment notwithstanding the verdict, finding sufficient evidence for a jury to conclude the defendants improperly interfered with Nesler's existing and prospective contracts. For the existing contracts claim (§ 766A), the trial court erred by focusing on whether third parties were willing to perform; the correct inquiry is whether the defendant's actions prevented the plaintiff (Nesler) from performing his own contractual obligations, which the evidence supported by showing his financing was cut off. For the prospective contracts claim (§ 766B), there was sufficient evidence that the defendants knew Nesler required financing and that their actions were intended to disrupt this prospective relationship, regardless of whether a formal financing contract existed. The court ordered a new trial, however, because the jury instructions were flawed. The instructions failed to adequately define 'improper' and did not explain that otherwise legal acts, like filing lawsuits, become improper only when done in bad faith, without belief in their merit, or with the sole intent to harass.
Analysis:
This case clarifies that the tort of intentional interference with contractual relations is not limited to inherently wrongful or illegal acts. It establishes that facially legitimate actions, particularly the use of legal processes like litigation and regulatory complaints, can be deemed 'improper' based on the actor's motive. The decision shifts the focus from the nature of the act itself to the bad-faith purpose behind it, providing a crucial check against the strategic use of the legal system as a tool for anti-competitive harassment. This precedent is significant for business tort litigation, as it allows plaintiffs to seek recovery for damages caused by competitors who weaponize litigation and regulatory systems to disrupt business operations.
