No. 5-531 / 04-1518Court of Appeals of Iowa.
Filed July 27, 2005
Appeal from the Iowa District Court for Buchanan County, K.D. Briner, Judge.
Appellants appeal from the district court’s entry of judgment dismissing their claim of intentional interference with a prospective employment contract. AFFIRMED.
Timothy J. Luce of Anfinson Luce, Waterloo, for appellant.
James T. Peters of Peters Law Offices, Independence, for appellee.
Considered by Vogel, P.J., and Mahan and Zimmer, JJ.
MAHAN, J.
Chemical Methods, Ltd., d/b/a Cue’s Janitorial Service and ChemMark of Waterloo appeal from an adverse district court judgment in their intentional interference with a contract action against Douglas Cue. We affirm the decision of the district court.
I. Background Facts Proceedings.
Marvin Cue is the owner of Chemical Methods, Ltd., d/b/a Cue’s Janitorial Service and ChemMark of Waterloo. Cue’s Janitorial offers cleaning services to commercial offices within a sixty-mile radius of Waterloo, Iowa. ChemMark, on the other hand, provides dishwashers, dishwashing supplies, and other cleaning agents to retail businesses within a one hundred-mile radius of Waterloo. In the spring of 2000, ChemMark hired Douglas Cue to service its existing accounts and secure new customers. Douglas’s duties consisted primarily of delivering chemicals and servicing machinery. He also assisted in preparing bids for new machinery and products sold by ChemMark. Although ChemMark was Douglas’s primary employer, he also occasionally measured carpets for Cue’s Janitorial. Although Marvin relied upon these measurements when preparing bids for prospective cleaning contracts, Douglas did not physically calculate or present bids for new janitorial services contracts. Significantly, he did not receive any training or education regarding the pricing and contracting of prospective cleaning contracts.
At the time ChemMark hired Douglas, there was some expectation that eventually he would be able to purchase the business from Marvin. However, the parties were unable to reach an agreement, and the purchase never transpired. After Douglas realized Marvin was not going to sell ChemMark, he informed Marvin he needed to make more money. Consequently, Marvin granted Douglas supervisory responsibility over the cleaning services being performed at Iowa Ham and USDA, both located in Independence, Iowa. Eventually, however, Douglas decided to start his own cleaning business named Superior Cleaning Services, Inc. In August 2003 Douglas approached Paul Hunziker, the operations manager at Iowa Ham, and suggested he terminate Iowa Ham’s current contract with Cue’s Janitorial and contract with Superior Cleaning for janitorial services. Under the terms of Iowa Ham’s current agreement with Cue’s Janitorial, either party to the contract could terminate it by giving thirty days written notice to the other party. After Douglas obtained insurance and created a list of proposed services, Hunziker provided notice of Iowa Ham’s desire to terminate the current contract with Cue’s Janitorial.[1]
Douglas’s attorney drafted the contract between Superior Cleaning and Iowa Ham. Similar to the contract between Cue’s Janitorial and Iowa Ham, the contract called for essentially identical services at the identical contract rate of $2725 per month.[2] However, unlike the contract with Cue’s Janitorial, Superior Cleaning’s contract called for automatic renewal of the contract in one-year increments unless either party provided written notification of nonrenewal thirty days prior to the expiration of the annual term.
On October 16, 2003, Cue’s Janitorial and ChemMark filed an action against Douglas seeking damages for alleged interference with a contract (Count I) and tortious interference with business relationships (Count II). The petitioners further requested temporary injunctive relief (Count III) to prevent Douglas from using insider information he obtained throughout his employment with ChemMark and Cue’s Janitorial. Prior to trial, the parties agreed to dismiss Count II. A trial on the two remaining issues commenced on June 30, 2004. Following trial, the court issued a ruling dismissing Count I and finding Count III moot. Cue’s Janitorial and ChemMark appeal alleging the district court erred in dismissing their claim for intentional interference with a contract.
II. Standard of Review.
Our scope of review is governed by how the case was tried in district court. See Kroes v. American Family Ins., 499 N.W.2d 309, 310-11 (Iowa Ct.App. 1993) (citing Grinnell Mut. Reins. Co. v. Voeltz, 431 N.W.2d 783, 785 (Iowa 1988)). This case was tried in equity; consequently, our review is de novo. Iowa R. App. P. 6.4. We have a duty to examine the entire record and adjudicate anew rights on the issues properly presented. In re Marriage of Smiley, 518 N.W.2d 376, 378 (Iowa 1994). We give weight to the fact findings of the trial court, especially when considering the credibility of witnesses, but are not bound by them. Iowa R. App. P. 6.14(6)(g).
III. The Merits.
Intentional interference with a business contract requires proof of the following elements:
1. The existence of a valid contractual relationship,
2. Knowledge of the relationship,
3. Intentional and improper interference inducing or causing a breach or termination of the relationship, and
4. Resultant damage to the party whose relationship has been disrupted.
Irons v. Community State Bank, 461 N.W.2d 849, 857
(Iowa Ct.App. 1990) (citing Kendall/Hunt Publ’g Co. v. Rowe, 424 N.W.2d 235, 244 (Iowa 1988)). It is undisputed a valid contract existed between Iowa Ham and Cue’s Janitorial and that Douglas knew of that relationship. Thus, excluding the damage issue, the fighting question before this court is whether the appellants established, by a preponderance of the evidence, the third element of the tort.
We begin our analysis by noting the underlying contract at issue was terminable at-will. Although this observation does not insulate Douglas from liability, the standard of proof required is more demanding in cases involving at-will contracts than in cases where the claimed interference is with an existing contract. Water Dev. Co. v. Board of Water Works, 488 N.W.2d 158, 162 (Iowa 1992). This is because cases involving interference with at-will contracts are more akin to interference with a prospective contractual relation because the alleged interference only damages a future expectancy, not a legal right See RTL Distrib., Inc. v. Double S Batteries, Inc., 545 N.W.2d 587, 590 (Iowa Ct.App. 1996). Consequently, although both interference with an existing contract and interference with a prospective contractual relation require the interference to be “improper,” the term is defined differently for each tort. Id.
(citing Nesler v. Fisher Co., Inc., 452 N.W.2d 191, 199 (Iowa 1990)). In the context of an interference with a prospective contract claim, the predominant purpose of the defendant’s conduct must be to financially injure or destroy the plaintiff’s business. Willey v. Riley, 541 N.W.2d 521, 526-27 (Iowa 1995). Accordingly, the alleged interference is not improper if:
a) the relation concerns a matter involved in the competition between the actor and the other, and
b) the actor does not employ wrongful means, and
c) his action does not create or continue an unlawful restraint of trade, and
d) his purpose is at least in part to advance his interest in competing with the other.
RTL Distrib., Inc., 545 N.W.2d at 591 (quoting Restatement (Second) of Torts § 768 (1979)). Although the courts have not defined the term “wrongful means” with any degree of particularity, it generally encompasses bribery, fraud, misrepresentation, deceit, and misuse of confidential information. Id. Upon application of these principles to the case at hand, we find, as did the district court, nothing in the record suggests Douglas acted improperly in obtaining the employment contract with Iowa Ham. The record demonstrates Douglas employed neither the use of confidential information, nor other improper means, in order to acquire the contract with Iowa Ham. Although Cue’s Janitorial experienced a monetary loss due to the termination of the contract, the record is simply devoid of any evidence demonstrating Douglas’s primary purpose in securing the Iowa Ham contract was achieve such a result or destroy Cue’s Janitorial. Rather, based upon our de novo review, it appears Douglas simply sought to advance his own business venture. Based on the foregoing, we conclude the proof proffered by the appellants is insufficient to satisfy the rigorous burden of proof required in cases involving prospective contracts. Accordingly, we affirm the decision of the district court.
AFFIRMED.