Watson's Carpet & Floor Coverings, Inc. v. McCormick
247 S.W.3d 169 (2007)
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Rule of Law:
A supplier's refusal to deal with a business is privileged and does not constitute an "improper means" for the tort of intentional interference with business relationships. However, a competitor who uses independently tortious acts, such as defamation, to induce that refusal to deal is not protected by the competitor's privilege and may be held liable.
Facts:
- Watson’s Carpet and Floor Coverings, Inc. ('Watson') and Carpet Den, Inc. ('Carpet Den') were competing retail carpet dealers.
- Both Watson and Carpet Den supplied carpet to a large commercial developer, Centex of Nashville ('Centex').
- In 1999, Centex entered an exclusive agreement with carpet manufacturer Mohawk Industries, Inc. ('Mohawk') to use only Mohawk's 'Portico' brand carpet.
- Centex requested that Mohawk make the Portico carpet available for purchase by both Watson and Carpet Den.
- Rick McCormick, the owner of Carpet Den, made untrue and defamatory statements to a Mohawk representative about Watson's president, including allegations of illegal drug use, mob connections, and cheating customers.
- Mohawk subsequently decided to allow only Carpet Den to sell the Portico brand carpet to Centex.
- Mohawk refused to sell the Portico brand to Watson for resale to Centex, though it would sell other products to Watson.
- As a result of its inability to procure Portico carpet, Watson lost Centex as a customer for its residential development projects.
Procedural Posture:
- Watson sued Mohawk, Carpet Den, and Rick McCormick in a Tennessee trial court for tortious interference with business relationships and civil conspiracy.
- The trial court granted summary judgment for the defendants, finding that Tennessee did not recognize the tort.
- On appeal, the Tennessee Court of Appeals initially affirmed the trial court's judgment.
- Following the Tennessee Supreme Court's decision in Trau-Med v. Allstate, which formally recognized the tort, the Court of Appeals granted a petition to rehear, reversed the trial court's summary judgment, and remanded the case for trial.
- A jury found Mohawk liable for interference with Watson's relationship with Centex and Carpet Den liable for interference with Watson's relationship with Mohawk.
- The jury also found all defendants liable for conspiracy to interfere with Watson's relationship with Centex, awarding compensatory and punitive damages.
- The defendants' post-trial motions were denied, and they appealed to the Tennessee Court of Appeals.
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Issue:
Does a supplier's refusal to sell a product to one dealer, thereby interfering with that dealer's relationship with a customer, constitute an 'improper means' sufficient to support a claim for intentional interference with a business relationship?
Opinions:
Majority - Patricia J. Cottrell, J.
No. A supplier's simple refusal to deal with a business is privileged conduct and does not constitute an 'improper means' sufficient to establish liability for intentional interference with a business relationship. The court reversed the judgment against Mohawk, finding that its decision not to sell Portico carpet to Watson was protected by the long-standing principle that a business has the freedom to choose with whom it deals, provided the reason is not independently unlawful. Because this refusal to deal was privileged and not a tort, Mohawk could not be held liable for the interference it caused in the Watson-Centex relationship. Consequently, the civil conspiracy claim against Mohawk also fails, as a conspiracy requires an underlying predicate tort, which was absent here. However, the court affirmed the judgment against Carpet Den for interfering with Watson's relationship with Mohawk. While competitors are privileged to compete, this privilege does not extend to the use of 'improper means.' The evidence that Carpet Den's owner used defamation—an independently tortious act—to persuade Mohawk to cut off Watson was sufficient to establish liability. The court also reversed the conspiracy judgment against Carpet Den because its alleged co-conspirator, Mohawk, committed no underlying tortious act.
Analysis:
This decision clarifies the scope of the tort of intentional interference with business relationships in Tennessee by establishing a strong 'privilege to refuse to deal' for suppliers. It shields companies from liability for making exclusive distribution choices, even if those decisions harm other businesses, treating such actions as legitimate competition. The ruling distinguishes this privileged business decision from the 'improper means' used by a competitor, reinforcing that the competitor's privilege is not absolute. The case effectively draws a line between harm caused by protected, strategic business decisions and harm caused by independently wrongful acts like defamation, which are not protected.
