William A. Kumpf v. Orin A. Steinhaus
121 L.R.R.M. (BNA) 3175, 1985 U.S. App. LEXIS 25802, 779 F.2d 1323 (1985)
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Rule of Law:
A corporate officer's or parent corporation's interference with the at-will employment contract of a subsidiary's employee is privileged when the action is motivated by a desire for personal financial gain that is aligned with the corporation's business interests.
Facts:
- William A. Kumpf was the president and a 20% shareholder of Lincoln National Sales Corp. of Wisconsin (Lincoln Wisconsin).
- Lincoln National Sales Corp. (Lincoln Sales), a subsidiary of Lincoln National Life Insurance Co. (Lincoln Life), owned the remaining 80% of Lincoln Wisconsin and controlled its board of directors.
- Orin A. Steinhaus, an executive at Lincoln Life, was tasked with restructuring the company's money-losing sales agencies.
- Steinhaus implemented a consolidation plan that merged Lincoln Wisconsin and four other agencies into a new entity, Lincoln Chicago Corp.
- The board of Lincoln Wisconsin, controlled by Lincoln Sales, approved the merger over Kumpf's objection.
- This merger eliminated Lincoln Wisconsin as a corporate entity and terminated Kumpf's employment.
- As part of the reorganization, Steinhaus became president of the new, consolidated agency, and his compensation, which was tied to agency revenue, increased as a result.
Procedural Posture:
- William Kumpf sued Orin Steinhaus and the Lincoln corporations in federal district court, alleging several claims including tortious interference with his employment contract.
- The district court sent the tortious interference claim to a jury.
- The jury returned a verdict in favor of the defendants, Steinhaus and the Lincoln corporations.
- Kumpf filed a motion for a new trial, arguing the judge gave the jury improper instructions regarding the defendant's motive.
- The district court denied Kumpf's motion for a new trial.
- Kumpf (appellant) appealed the district court's judgment to the U.S. Court of Appeals for the Seventh Circuit.
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Issue:
Does an executive's personal financial motive, such as increasing their own income, constitute an improper motive sufficient to defeat the privilege to interfere with an at-will employment contract when that motive aligns with the corporation's legitimate business interests?
Opinions:
Majority - Easterbrook, Circuit Judge
No. An executive's personal financial motive does not defeat the privilege to interfere with an at-will employment contract if that motive is aligned with the corporation's interests. The court reasoned that the privilege for corporate managers to act in the company's interest is fundamental, similar to the business judgment rule which insulates business decisions from judicial second-guessing. Kumpf was an employee-at-will, a status that limits judicial review of termination reasons. The court held that a motive of 'greed' is not a violation of public policy in Wisconsin; in fact, aligning a manager's financial self-interest with the company's interests through compensation structures is a common and legitimate business practice. Because Steinhaus's financial gain was directly tied to the success of the reorganized business—the same interest as Lincoln Life—his motive was not for a 'collateral matter' and was therefore privileged. To ask a jury to determine whether the motive was 'predominantly' personal versus corporate would be a 'bootless investigation' when the two interests are identical.
Analysis:
This decision significantly strengthens the manager's privilege in tortious interference claims, particularly within complex corporate structures. By linking the privilege to the business judgment rule and the at-will employment doctrine, the court makes it exceedingly difficult for terminated employees to challenge reorganizations, even when executives personally profit. The ruling establishes that so long as personal financial incentives are aligned with corporate objectives, an executive's actions will likely be deemed privileged. This creates a high bar for plaintiffs, who must now show that the executive's motive was entirely collateral to any legitimate business interest, such as personal malice unrelated to business performance.
