Opinion
No. 55223-6-I.
May 1, 2006.
Appeal from a judgment of the Superior Court for King County, No. 02-2-32413-4, Robert H. Alsdorf, J., entered November 12, 2004.
Counsel for Appellant(s), G. Paul Mabrey, Attorney at Law, 7512 Stanich Ln Ste 2, Gig Harbor, WA 98335-5127.
Counsel for Respondent(s), Joseph Adams Cope, 4750 Table Mesa Drive, Boulder, CO 98305-5575.
James Dewitt II McBride, Julin McBride PS, 16088 NE 85th St, Redmond, WA 98052-3502.
Affirmed in part and reversed in part by unpublished opinion per Becker, J., concurred in by Appelwick, C.J., and Coleman, J.
Wareing Shire Breeders' claim of intentional interference with a business expectancy should not have been dismissed on summary judgment. The record contains sufficient evidence to prove that the American Shire Horse Association intentionally ignored its own rules when it refused to allow appellant Wareing's prize-winning colt to compete in a national horse show, an event that likely would have enhanced the colt's value.
FACTS
The American Shire Horse Association, a non-profit Washington corporation, is the breed registry for the Shire Horse in the United States. Its rules govern the registry of purebred Shire horses. The Association also organizes national and regional horse shows. Historically, only registered Shire horses were eligible to compete in the American shows, except for foals. When a horse is registered, its parentage is verified through DNA analysis. At a meeting in 1998, the Association's board of directors amended the eligibility rules to include "notified colts", a category found in the registration rules of the Association's counterparts in England and Canada. A "notified colt" is a young stallion whose owner has notified the registry that the colt will be presented for inspection and registration when he turns two years old.
Clerk's Papers at 327.
The present dispute involves a valuable colt named Hillmoor Double Diamond, imported into the United States from England as a yearling stallion in December 2000 by appellant Wareing Shire Breeders. Wareing is a family partnership whose purpose is to import English bred Shire horses and to develop a superior line of Shire horses. The Wareings planned to show their new colt in August 2001 at the annual national show of the American Shire Horse Association, which is the most prestigious Shire show in this country.
The national show was scheduled to occur in Pueblo, Colorado, on August 24, 2001. In March, coordinator Sheila Junkins sent the eligibility rules to Kathy Jernigan, the show manager and secretary. The rules she sent to Jernigan did not include the 1998 amendment that allowed notified colts to compete. Jernigan published the defective set of rules in the show's Premium Book.
The Wareings entered the colt in the national show in early August. They were informed that the Association would not allow the colt to compete because, although he was a notified colt under the English rules, he was not yet registered. Arlin Wareing objected, based on his recollection that the eligibility rules had been changed to include notified colts. Association President Heinz Naef consulted Association secretary Sharon McLin, who insisted that the rules required actual registration. Naef decided to enforce the published rule; the colt was excluded.
In September, 2001, Todd Wareing sent a written complaint to the Association regarding the exclusion of the colt at the National show. In e-mails sent to Association members the next month, the Association's attorney confirmed the error. He said he had looked through the minutes from past board meetings, and to his "surprise, and utter dismay," he discovered the motion that had been adopted at the 1998 meeting. He explained that the 1998 rule change had been inadvertently dropped from the printed rules. The person who updated the rules to incorporate amendments adopted in 2000 had started with an older version instead of using the correct version (updated through 1998) that was on a computer. The attorney apologized for the clerical error, but he also said that the Wareings need "to share some of the blame" for the colt being excluded because they had the same ability to research the board minutes as anyone else. Naef also apologized: "it is clear that ASHA erred in opposing your entry of Hillmoor Double Diamond in any ASHA sanctioned show as a notified colt." In May 2004, Wareing sued the Association for tortious interference with a business expectancy. The trial court dismissed the suit on summary judgment. Wareing appeals.
Clerk's Papers at 265-66.
Clerk's Papers at 282.
We apply the usual standard of review for summary judgments, and take all fact and inferences in the record in the light most favorable to Wareing. CR 56(c); Wilson v. Steinbach, 98 Wn.2d 434, 437, 656 P.2d 1030 (1982). The elements of a claim for tortious interference are: the existence of a valid business expectancy; knowledge of the business expectancy on the part of the interferor; an intentional interference inducing or causing a termination of the expectancy; the wrongfulness of the intereference, i.e., that the interferor had an improper purpose or used improper means; and resultant damages. Sintra, Inc. v. Seattle, 119 Wn.2d 1, 28, 829 P.2d 1239 (1992).
Existence of Business Expectancy
The tort of interference with a business expectancy protects the opportunity to obtain prospective customers. Proof of a specific contract is not required. While the plaintiff must show that future business opportunities and profits "are a reasonable expectation and not merely wishful thinking", certainty of proof is not required. Caruso v. Local 690, 33 Wn. App. 201, 208, 653 P.2d 638 (1982), rev'd on other grounds, 100 Wn.2d 343 (1983).
Wareing had high expectations that the superiority of the recently imported yearling would be recognized at the National show, and that showing him there would enhance his value for breeding purposes. The Association contends this was not a reasonable expectancy because of the inherent unpredictability of any contest such as a horse show.
Given Wareing's expertise and the colt's record in previous shows, a jury could easily find Wareing's expectancy to be reasonable. Arlin Wareing, the operations partner, has bought and sold literally hundreds of Shire horses, has had four premier stallions standing at stud over the last 35 years, and has won more national championships with his horses than any other Shire breeder. Hillmoor Double Diamond won first place in 11 of 12 shows in England. In July, 2001, he won Grand Champion Shire Stallion at the Canadian National Shire Show. On the day before the National show in August, 2001, the colt competed in the Colorado State Fair's Open Draft Show, also held in Pueblo. There, he won Grand Champion Draft Stallion and Supreme Champion Draft Horse, the highest award given to a draft horse, competing against all draft breeds including the Shire horses that were included in the National show the next day.
Clerk's Papers at 269, 334-337, 507-508.
The Association argues that even if the colt was a likely winner, any expectation the Wareings had for him at the show was wishful thinking once they learned he was ineligible under the rule as published. But it is undisputed that the rule as published was invalid. Wareing's expectancy was reasonably based on Arlin Wareing's recollection that notified colts were eligible — a recollection later acknowledged to be accurate.
The Association's Knowledge of Wareing's Business Expectancy A plaintiff satisfies the knowledge element with evidence that the alleged interferor "knew or should have known of the business opportunity or expectancy." Caruso v. Local 690, 33 Wn. App. at 207. When the Association challenged this element below, Wareing responded with evidence that Arlin Wareing had spoken about his expectations for the colt at the 2001 annual meeting, several months before the show. It was well known among the officers that exhibiting at a national show is important in promoting a stallion for potential breeding purposes. On appeal, the Association has abandoned its argument with regard to this element of Wareing's claim, and it is deemed waived. RAP 10.3(a)(5).
Intentional Interference with Wareing's Business Expectancy Interference with a business expectancy is intentional where either the actor actually desired to bring about the interference, or the actor knew that interference is certain or substantially certain to occur as a result of his or her actions. Newton Ins. Agency v. Caledonian Ins. Group, Inc., 114 Wn. App. 151, 158, 52 P.3d 30 (2002).
Wareing does not claim that the clerical error in transcription of the rule was intentional. Wareing's theory of intentional action is based on the Association's failure to investigate and correct the rule after the Wareings called it into question. A week before the show, Association President Heinz Naef called Arlin Wareing with the bad news that Hillmoor Double Diamond was not eligible to show. Naef told Wareing that Association secretary Sharon McLin had determined the colt's status as a "notified colt" in England was not recognized as an acceptable registration under the rules of the Association. Arlin Wareing knew that notified colts had been shown in the past in other Shire shows sponsored by the Association. The Association's rules had always been kept and maintained by the secretary, and were not available to Arlin Wareing when Naef called him. He explained this to Naef, and said he thought there was a rule change that specifically allowed notified colts.
Clerk's Papers at 51, 331, 554-55.
According to Naef's later account in the 2002 Association newsletter, he went back to Sharon McLin and asked her about the points raised by Arlin Wareing. McLin told him that Canadian notified colts had been allowed in the past due to a reciprocity agreement, but there was no such agreement pertaining to English colts. Naef knew that McLin's interpretation of the eligibility rules was at odds with the rule published in the premium book for the show, which did not make any exception for Canadian colts and did not mention a reciprocity agreement. He wrote in his newsletter account that he was personally inclined to give Wareing the benefit of the ambiguity: "I felt that we did not clearly state this [the Canadian exception] in our show rules and we should allow all notified colts to show in any coming sanctioned show until the board would decide this issue." Notwithstanding Naef's own views on the issue, he believed he needed the board's unanimous vote to permit Wareing's colt to be in the show. The board unanimously approved it in a telephone vote, but when the written votes came in they were not unanimous. Naef then stood by the original decision and refused to let the colt compete.
Clerk's Papers at 331-32.
Clerk's Papers at 51.
In all the consultation that took place before the show, no one attempted to research the minutes to verify the accuracy of the published rule. Wareing contends that the Association's deliberate decision to exclude his stallion, without investigating Arlin Wareing's claim about the change in the rule, amounted to an intentional interference.
Wareing points out that the Association had two other possible courses of action that would not have caused damage: research the rules in the time remaining before the show, or else let the colt show and research the rules later.
These options do appear sensible in hindsight, because choosing either one of them would have avoided the interference. Still, for the interference to be intentional rather than negligent, there must be evidence that at the time the question came up, the Association enforced the published rule despite knowing it was outdated and invalid. Put another way, if those acting on behalf of the Association were merely careless in failing to check the rule against the minutes, that would not prove their desire to interfere with the Wareings or their knowledge that excluding the colt would be certain to interfere with a reasonable expectation.
There is little evidence suggesting that Naef, the president, deliberately decided to ignore a known rule when he made the decision to exclude the colt. But Naef's decision was informed and influenced by Secretary Sharon McLin, and as to McLin, the record more amply supports an inference that she knew the published rule was incorrect. McLin was responsible for keeping the minutes of the board meetings, and she was the custodian of the corporate records. She personally took minutes at the meeting in 1998 when the board passed the rule making notified colts eligible. Yet when Naef asked her about Arlin Wareing's claim that notified colts were eligible, she was "confrontational and argumentative" in her assertion that they were not eligible. And just a few weeks earlier, she had written a letter to another exhibitor stating that it was the Association's policy to allow Canadian yearlings to show as notified colts. Notwithstanding McLin's claim during her deposition that she simply forgot about the rule change, a jury could infer that she knew the posted rule was wrong, and knew that enforcing it as posted would prevent the Wareings' colt from competing and winning.
Clerk's Papers at 252.
Clerk's Papers at 113-14.
Clerk's Papers at 53.
Clerk's Papers at 514.
Clerk's Papers at 113-14.
Improper Purpose or Improper Means
A plaintiff must establish not only that the harmful interference was intentional, but also that the interference was wrongful. Interference is wrongful — i.e., it breaches a duty of non-interference — if it is done for an improper purpose or by improper means. Pleas v. City of Seattle, 112 Wn.2d 794, 803-804, 774 P.2d 1158 (1989). Both improper purpose and improper means were found in Pleas, where the City of Seattle intentionally stalled development of a high-rise apartment complex on Capitol Hill. The improper motive was a desire to curry favor with the active and influential opponents of the project, while the improper means was the City's arbitrary refusal to grant necessary permits. Pleas, 112 Wn.2d at 804-05.
Wareing contends there is an issue of material fact as to whether secretary McLin acted out of an improper motive when she took steps to disqualify Wareing's colt. There is evidence that McLin competed against Wareing in the Shire business and had a horse entered in the National show. There is also evidence that she thoroughly disliked the Wareings, to the point that Naef thought it could affect her objectivity in her capacity as secretary. Moreover, there is the letter she wrote on July 31, 2001, telling an Ohio exhibitor it was the Association's policy to allow Canadian yearlings to be shown as notified colts. Naef described her as confrontational and argumentative in reaction to Arlin Wareing's assertion that there had been a rule change. From the evidence of McLin's animosity, her status as a competitor with Wareing, and her inconsistency in interpreting the rules, a jury could conclude that her interference had an improper purpose. Wareing contends that the record also contains evidence that the Association used improper means because, analogous to the City of Seattle in Pleas, it used its own rules in an arbitrary manner to exclude the colt from the show. The Association responds that it was under no obligation to anyone to conduct a show under any particular set of rules, and that the 1998 amendment allowing notified colts was "soon forgotten" and of no consequence.
Clerk's Papers at 46, 47, 117, 271.
Clerk's Papers at 45, 66, 70.
Clerk's Papers at 514.
Brief of Respondent at 19.
A horse registry association owes a duty of reasonable care to make its records "speak the truth", and this duty is owed to every person who might reasonably be expected to rely on them. Howard v. National French Draft Horse Association, 169 Iowa 719, 732, 151 N.W. 1056 (1915). The plaintiff in Howard bought a horse for more than it was worth on the strength of a certificate issued by a draft horse registry. The registry's investigation into the breeding of the horse was not thorough. The court approved the assessment of damages against the registry as justified both by equity and the law of negligence.
While Howard does not directly address the duty of a registry with respect to the promulgation of show rules, it does demonstrate that a horse registry is a serious undertaking with a duty to enforce its rules in a non-arbitrary manner. In that respect, Wareing's analogy to Pleas is sound. Having promulgated rules that have an economic impact, the Association cannot arbitrarily forget about them. A jury could find that the Association, especially through McLin's influence, manipulated its own rules to exclude Wareing's colt from the show, and thereby breached a duty of non-interference.
Resultant Damages
The Association argues that causal connection is lacking between the publication of the incorrect rule and the termination of Wareing's expectancy. The thrust of this argument is that the Wareings caused their own damage: they could have avoided the harm by researching the rules themselves, by complying with the published rule, or by notifying the Association earlier about the problem with the rule as published. These are arguments to be made to a jury. They do not defeat the element of proximate cause as a matter of law. The evidence submitted by Wareing is sufficient to establish that but for the Association's failure to correct its faulty rule, Hillmoor Double Diamond would have won a top accolade at the National show, and improved the economic value of his breeding activity and his offspring.
The Association further argues that Wareing's failure to register the colt or to challenge the rule until just before the show was an independent business judgment that bars a finding of proximate cause under King v. City of Seattle, 84 Wn.2d 239, 525 P.2d 228 (1974). The independent judgment rule as articulated in King can no longer serve as a bar to the proximate cause element of a legal claim. City of Seattle v. Blume, 134 Wn.2d 243, 260, 947 P.2d 223 (1997).
In summary, the record on summary judgment is sufficient to establish all the elements of a claim for intentional interference with a business expectancy. The order dismissing this claim must be reversed.
The trial court is affirmed, however, with respect to its dismissal of Wareing's alternative theory of negligent interference with a business expectancy. No such cause of action has been recognized in our courts, and Wareing does not persuasively demonstrate that the contours of such an action could be defined in such a way as to avoid a broad and undesirable expansion of tort liability for business decisions.
Reversed in part, affirmed in part.
COLEMAN and APPELWICK, JJ., concur.