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Walnut Street Associates, Inc. v. Brokerage Concepts, Inc.

Supreme Court of Pennsylvania
610 Pa. 371, 2011 Pa. LEXIS 1103, 20 A.3d 468 (2011)
ELI5:

Rule of Law:

Providing truthful information to a third party that causes the third party to terminate a contract with another does not constitute improper interference and is not actionable as a tortious interference with contractual relations.


Facts:

  • Walnut Street Associates (WSA) served as the insurance broker of record for Procacci Brothers Sales Corporation (Procacci).
  • On WSA's recommendation, Procacci retained Brokerage Concepts, Inc. (BCI) as the third-party administrator for its insurance plans, and BCI paid commissions to WSA.
  • In 2005, after BCI refused to meet Procacci's request to lower costs, Procacci notified BCI that it was terminating their business relationship.
  • In response, a BCI employee, Kimberly Macrone, wrote a letter to Procacci asking it to reconsider its decision.
  • In the letter, Macrone truthfully disclosed the amount of compensation WSA had been receiving as the broker of record.
  • The disclosed compensation amount was higher than Procacci was aware it had been paying.
  • Upon learning this truthful information, Procacci terminated its long-standing contractual relationship with WSA.

Procedural Posture:

  • Walnut Street Associates (WSA) filed an action against Brokerage Concepts, Inc. (BCI) in the trial court, alleging tortious interference with contractual relations.
  • At trial, the court denied BCI's request for a jury instruction based on Restatement (Second) of Torts § 772(a), which provides that truthful statements are not improper interference.
  • The jury, instructed on the more general principles of Restatement § 767, found in favor of WSA and awarded $330,000 in damages.
  • The trial court denied BCI's post-trial motion for judgment notwithstanding the verdict.
  • BCI, as appellant, appealed to the Superior Court of Pennsylvania, an intermediate appellate court.
  • The Superior Court reversed the trial court's decision, predicting that the Pennsylvania Supreme Court would adopt § 772(a) and holding that truthful statements cannot be the basis for a tortious interference claim.
  • The Pennsylvania Supreme Court granted review of the Superior Court's decision.

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Issue:

Does providing truthful information that causes a third party to terminate a contract constitute tortious interference with contractual relations under Pennsylvania law?


Opinions:

Majority - Chief Justice Castille

No, providing truthful information that causes a third party to terminate a contract does not constitute improper interference and is not actionable as tortious interference with contractual relations. The court formally adopts the Restatement (Second) of Torts § 772(a), which establishes that giving truthful information is a complete defense to a claim of tortious interference. This specific rule supplants the more general, multi-factor balancing test for 'improper' interference found in § 767. The court reasoned that since the tort requires intentional and 'improper' interference, the conveyance of truthful information cannot logically be deemed 'improper.' This adoption is not a new rule of law but a refinement of existing principles, consistent with prior cases that focused on fraudulent or groundless statements as the basis for liability.



Analysis:

This decision formally incorporates Restatement (Second) of Torts § 772(a) into Pennsylvania common law, creating a bright-line rule that truth is an absolute defense to a claim of tortious interference with contract. It clarifies that the general, multi-factor 'improperness' test of § 767 is inapplicable when the alleged interference consists solely of conveying truthful information. This provides significant protection for defendants and promotes the free exchange of accurate commercial information, potentially limiting litigation by allowing for dismissal of claims where the truth of the defendant's statement is not in dispute.

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