Beaudry v. Farmers Ins. Exch. ( 2016 )

1 IN THE COURT OF APPEALS OF THE STATE OF NEW MEXICO
2 Opinion Number: ___________
3 Filing Date: October 17, 2016
4 NO. 33,618
5 CRAIG BEAUDRY,
6 Plaintiff-Appellee,
7 v.
8 FARMERS INSURANCE EXCHANGE,
9 TRUCK INSURANCE EXCHANGE,
10 FIRE INSURANCE EXCHANGE,
11 MID-CENTURY INSURANCE COMPANY,
12 FARMERS NEW WORLD LIFE INSURANCE
13 COMPANY, FARMERS INSURANCE
14 COMPANY OF ARIZONA, LANCE CARROLL,
15 and CRAIG ALLIN,
16 Defendants-Appellants,
17 and
18 FARMERS GROUP, INC., TOM GUTIERREZ,
19 and CHRISTOPHER KERR,
20 Defendants.
21 APPEAL FROM THE DISTRICT COURT OF SANTA FE COUNTY
22 Sarah M. Singleton, District Judge
1 Law Office of Jane B. Yohalem
2 Jane B. Yohalem
3 Santa Fe, NM
4 O’Friel and Levy, P.C.
5 Pierre Levy
6 Aimee Bevan
7 Santa Fe, NM
8 Law Office of Barry Green
9 Barry Green
10 Santa Fe, NM
11 for Appellee
12 Lewis Roca Rothgerber Christie LLP
13 Ross L. Crown
14 Albuquerque, NM
15 Lewis Roca Rothgerber Christie LLP
16 Steven J. Hulsman
17 Kristina N. Holmstrom
18 Phoenix, AZ
19 Skadden, Arps, Slate, Meagher & Flom LLP
20 Raoul D. Kennedy
21 James P. Schaefer
22 Palo Alto, CA
23 for Appellants
24 Brownstein Hyatt Farber Schreck, LLP
25 Eric R. Burris
26 Nury H. Yoo
27 Albuquerque, NM
28 for Amicus Curiae Association of Commerce and Industry of New Mexico
1 OPINION
2 SUTIN, Judge.
3 {1} Plaintiff Craig Beaudry received substantial compensatory and punitive
4 damages jury verdicts on his claim of prima facie tort against various Farmers
5 Insurance companies (the Companies)1 and two Farmers employees, Lance Carroll
6 and Craig Allin (altogether, Defendants). At trial, Plaintiff proved that, in terminating
7 his insurance agent agreement (the Agreement), Defendants intended to harm and
8 actually harmed Plaintiff with malice and without justification. Defendants’ appeal
9 asserts that the district court erred as a matter of law in submitting prima facie tort to
10 the jury because termination of the Agreement was determined by the district court
11 to be lawful and authorized under the terms of the Agreement. Defendants also attack
12 the punitive damages award as unconstitutional.
13 {2} The approaches of the parties diverge significantly. Defendants treat the factual
14 detail of their proved malicious, intentionally harmful conduct in terminating the
15 Agreement as irrelevant as a matter of law, whereas Plaintiff focuses heavily on that
16 conduct as the underlying appropriate basis for application of prima facie tort.
17 Defendants represent that, based on their global legal research, “[u]pholding the
1
18 Farmers Insurance Exchange, Truck Insurance Exchange, Fire Insurance
19 Exchange, Mid-Century Insurance Company, Farmers New World Life Insurance
20 Company, and Farmers Insurance Company of Arizona.
1 verdict [in this case] would make this Court the first appellate tribunal in America to
2 hold that prima facie tort can be used on a contract termination expressly authorized
3 by the contract itself.” Plaintiff interprets New Mexico case law as permitting the
4 application of prima facie tort in the circumstances under which Defendants’
5 termination of the Agreement was expressly authorized by a for-cause termination
6 provision in the Agreement.
7 {3} As this Opinion lays out, how this case was tried by the parties is a crucial and
8 compelling consideration in how the author of this Opinion (referred to hereafter in
9 the first person) decides Defendants’ issues on appeal. I hold that, under the particular
10 manner in which this case was tried, prima facie tort was properly sent to the jury, and
11 the majority affirms the judgment and the orders denying Defendants’ post-trial
12 motions for judgment as a matter of law. The majority also holds that the jury’s award
13 of punitive damages was not unconstitutional and affirms the award.
14 BACKGROUND
15 A. Defendants’ Presentation of Facts
16 {4} In conformity with their approach that purely legal issues are to be addressed
17 and decided, Defendants limit their presentation of the facts to the few that relate to
18 the Agreement and that bear upon the appellate issues, the majority of which I quote
19 here from Defendants’ brief in chief.
2
1 {5} “[Plaintiff] was an insurance agent who contracted to sell insurance policies on
2 behalf of the Companies under [the] . . . Agreement[.] . . . Lance Carroll contracted
3 with the Companies to be a District Manager for the territory that included
4 [Plaintiff’s] agency. . . . Craig Allin served as the Companies’ State Director in New
5 Mexico.” “The Agreement specified that [Plaintiff] was an ‘independent contractor.’
6 The Agreement obligated [Plaintiff] to ‘submit to the Companies every request or
7 application for insurance for the classes and lines underwritten by the Companies and
8 eligible in accordance with their Rules and Manuals.’ It further provided that, ‘[a]ll
9 business acceptable to the Companies and written by the Agent will be placed with
10 the Companies,’ and that the Agent must ‘servic[e] all policyholders of the
11 Companies in such a manner as to advance the interests of the policyholders, the
12 Agent and the Companies.’ The Agreement was terminable upon three months[]
13 written notice and terminable for specified reasons on thirty days[] written notice.
14 One of the specified reasons was ‘[s]witching insurance from the Companies to
15 another carrier.’ ”
16 {6} “From 2000 through 2011, [Plaintiff] operated an insurance agency in Taos,
17 [New Mexico,] selling policies to the Companies’ policyholders pursuant to the
18 Agreement. One of those policyholders was Moises Martinez. In September 2010,
3
1 [Plaintiff]2 placed one of Martinez’s policies with a rival carrier, i.e., CNA.
2 [Defendants] investigated and concluded that [Plaintiff’s] agency had breached the
3 Agreement. [Defendants] elected to terminate the Agreement in accordance with the
4 Companies’ policy of terminating agents who place eligible business outside the
5 Companies.” “By letter dated February 1, 2011, the Companies notified [Plaintiff]
6 that the Agreement would be terminated effective March 5, 2011. The termination
7 date was later changed to March 24, 2011. [Plaintiff], therefore, received [fifty-one]
8 days[] notice of his termination—well in excess of the [thirty] days required for
9 termination based on a breach of the Agreement.” “[Plaintiff’s] termination was
10 considered by a Termination Review Board and ultimately upheld by the
11 Companies.”
12 B. Plaintiff’s Presentation of Facts
13 {7} In stark contrast, in his answer brief, Plaintiff recites approximately twenty-one
14 pages of facts covering, in detail, everything that went to the jury on his prima facie
15 tort claim, including proof of malicious intent to harm him, actual and significant
16 harm to him, improper, offensive, and unfair means employed by various Farmers’
17 employees, absence of justification, and compensatory damages. According to
18 Plaintiff, despite his stellar record as an agent, his contract was terminated after he
2
19 The record indicates that Plaintiff’s employee, April Granger, placed the
20 policy with CNA.
4
1 complained to his supervisor, Carroll, and his supervisor’s supervisors about a fellow
2 agent who was “poaching” clients. Additionally, Plaintiff states that by terminating
3 the Agreement, Carroll and Allin profited financially and in job security by
4 terminating Plaintiff and distributing the policies previously held at Plaintiff’s
5 agency. Among many other details, Plaintiff outlines broken promises Defendants
6 made to Plaintiff, including Defendants’ assurance that his hard work would pay off
7 and that only “deadbeat” agents were terminated. Plaintiff admits that his employee
8 mistakenly and temporarily transferred a Farmers policy to another company, but
9 explains that the error was quickly remedied. This error occurred at a time when the
10 agency was stressed due to the absence of Plaintiff’s wife, Dee, who handled
11 operations at the agency, but who had lost both kidneys and was forced to relocate to
12 Denver for intensive treatment. Despite his having corrected the mistake quickly,
13 Plaintiff states that he was ambushed, that his termination was engineered, and that
14 he was never given a full opportunity to explain the situation either before his
15 termination or after. He describes feelings of shock, betrayal, and depression. It is a
16 given, based on the jury verdict, that the facts Plaintiff presented showed the
17 termination of Plaintiff’s agency was based on unjustifiable motives, including actual
18 and malicious intent to harm Plaintiff, greed, personal self-interest, and retribution.
19 In their reply brief, Defendants characterize Plaintiff’s factual presentation as
5
1 “irrelevant” and as “a skewed version of the record in an attempt to garner sympathy
2 and divert attention from the fatal legal defects in his prima facie tort claim.”
3 {8} Based on the record, the majority treats the facts as provided in Plaintiff’s
4 answer brief as established and uncontrovertible. In considering the elements of prima
5 facie tort, the jury obviously believed enough of Plaintiff’s extensive factual detail
6 to conclude that the elements were satisfied.
7 C. Procedural
8 {9} Plaintiff’s operative complaint set out eight claims for relief sounding in
9 contract and tort: “tortuous[3] interference with contract”; “tortuous interference with
10 prospective contractual relations”; breach of contract; breach of the covenant of good
11 faith and fair dealing; conspiracy; intentional infliction of emotional distress; prima
12 facie tort; and violation of the New Mexico Insurance Code. Presumably, these claims
13 were set out because Plaintiff believed that each of the eight claims stated a claim
14 upon which relief could be granted. Plaintiff also sought punitive damages.
15 {10} During the course of litigation, Defendants filed numerous dispositive motions,
16 including a motion for summary judgment on what Defendants characterized as
17 Plaintiff’s claim for wrongful termination of the Agreement. In this motion,
18 Defendants sought a ruling that the termination of the Agreement was authorized
3
19 Although “tortuous” (i.e., complicated or complex) may be the proper term
20 to describe this case, it is clear Plaintiff meant “tortious” (i.e., causing a tort).
6
1 under the terms of the Agreement, and thus, Plaintiff’s claims for breach of contract,
2 breach of the implied covenant of good faith and fair dealing, and any other claim
3 “premised in whole or [in] part on wrongful termination of the Agreement” should
4 be dismissed. In response, Plaintiff argued that genuine issues of material fact existed
5 as to whether “Defendants legitimately fired [Plaintiff] for breach of contract.”
6 Plaintiff’s argument in opposition primarily focused on the question of whether he
7 could be found to have breached the Agreement, and thus be subject to termination,
8 when his employee switched an insured’s policy in violation of Plaintiff’s
9 instructions. Plaintiff also argued that there were “disputes of fact on whether
10 Defendants actually fired [Plaintiff] for breaching his contract” and that Defendants’
11 “inconsistent reasons” for terminating Plaintiff created “a reasonable inference that
12 the reasons were bogus[.]”
13 {11} The district court granted Defendants’ motion “on the issue of breach of
14 contract regarding the termination” and concluded that “the contract was properly
15 terminated” because it was undisputed that an existing insured’s policy was moved
16 to another insurer in violation of the Agreement and because the district court
17 concluded that Plaintiff bore the responsibility of his employee’s breach. Plaintiff did
18 not appeal the district court’s decision and order, and the parties appear to have
19 agreed that, in addition to dismissing the breach of contract claim, the decision and
7
1 order also dismissed the breach of the implied covenant of good faith and fair dealing
2 claim.
3 {12} The only claims for relief ultimately presented to the jury were (1) conspiracy
4 by individual defendants to commit prima facie tort, and (2) prima facie tort
5 committed by all defendants as to the termination of the Agreement. The remainder
6 of the claims for relief were either dismissed by the district court based on the court’s
7 determination that the claims were not meritorious or were dismissed when Plaintiff
8 chose not to pursue the claims because he felt those claims were not viable given
9 certain rulings by the court.
10 {13} The jury found against Plaintiff on the conspiracy claim but found in favor of
11 Plaintiff on the prima facie tort claim, awarding $1 million in compensatory damages
12 and $2.5 million in punitive damages. Post trial, Defendants filed a renewed motion
13 for judgment as a matter of law, on the ground that the prima facie tort claim was
14 legally deficient, and a renewed motion for judgment as a matter of law or for a new
15 trial because the prima facie tort claim was not supported by the evidence. In
16 addition, Defendants filed a motion to vacate or remit the punitive damages award.
17 The district court denied all three post-trial motions.
18 {14} Defendants appeal asserting that (1) the prima facie tort claim evaded the
19 stringent requirements of multiple established doctrines of law; (2) Plaintiff failed as
8
1 a matter of law to satisfy at least four of the five essential elements of prima facie tort;
2 (3) affirmance of the judgment would mean that parties who properly perform their
3 contracts face greater exposure than those who breach them; and (4) the punitive
4 damages award is unconstitutional.4
5 D. Prima Facie Tort Law in New Mexico
6 {15} I preface discussion of the issues and the analysis with a brief introduction to
7 pertinent prima facie tort law in New Mexico. These cases and some additional ones
8 will be discussed in this Opinion as needed and as I address the parties’ legal
9 arguments.
10 {16} Prima facie tort became part of our common law with its adoption in 1990 in
11 Schmitz v. Smentowski, 1990-NMSC-002, 109 N.M. 386, 785 P.2d 726. Schmitz sets
12 out the following four elements that are required to establish a prima facie tort claim:
13 (1) an intentional, lawful act by the defendant; (2) an intent to injure the plaintiff;
14 (3) injury to the plaintiff, and; (4) the absence of justification or insufficient
15 justification for the defendant’s acts. Id. ¶ 37. The Schmitz Court molded the doctrine
4
16 Although one of Defendants’ post-trial motions questioned the sufficiency of
17 the evidence to support Plaintiff’s prima facie tort claim and in the notice of appeal
18 Defendants purport to appeal the order denying that motion, in their briefs and during
19 oral argument on appeal Defendants focus primarily on their legal argument, and
20 Defendants explicitly stated during oral argument that their appeal is not a sufficiency
21 of the evidence appeal. Because Defendants chose to focus on legal arguments and
22 did not continue to argue that there was insufficient evidence, I narrow the review
23 accordingly.
9
1 from mixtures of New York and Missouri case law and the Restatement (Second) of
2 Torts § 870 (Am. Law Inst. 1979). Schmitz, 1990-NMSC-002, ¶¶ 35-48. “To
3 constitute a prima facie tort, the tort-feasor must act maliciously, with the intent to
4 cause injury, and without justification or sufficient justification.” Id. ¶ 45; see also
5 Restatement (Second) of Torts § 870 cmt. e (indicating that “injury . . . means that the
6 harm must be to a legally protected interest of the plaintiff”). “[I]t need not be shown
7 that the act was solely intended to injure plaintiff.” Schmitz, 1990-NMSC-002, ¶ 47.
8 “[I]f a defendant offers a purpose other than the motivation to harm the plaintiff as
9 justification for his actions, that justification must be balanced to determine if it
10 outweighs the bad motive of the defendant in attempting to cause injury.” Id. ¶ 46. In
11 assessing that motive, “the intent [is to] be balanced to determine if the activity was
12 beyond the bounds of what society should tolerate.” Id. ¶ 57. This balancing test has
13 since been applied in a number of cases. See, e.g., Portales Nat’l Bank v. Ribble,
14 2003-NMCA-093, ¶¶ 3, 10, 134 N.M. 238, 75 P.3d 838 (employing the balancing test
15 and finding that there were genuine issues of material fact that precluded summary
16 judgment); Martinez v. N. Rio Arriba Elec. Coop., Inc., 2002-NMCA-083, ¶¶ 26-31,
17 132 N.M. 510, 51 P.3d 1164 (reversing a jury verdict based on prima facie tort after
18 considering the factors, concluding that none of the plaintiff’s proof taken alone or
19 together “[rose] to the level of both behavior and injury that is envisioned by the
10
1 theory of prima facie tort[,]” and holding that the plaintiff “did not have an actionable
2 claim for prima facie tort”); Beavers v. Johnson Controls World Servs., Inc. (Beavers
3 II), 1995-NMCA-070, ¶¶ 20-22, 120 N.M. 343, 901 P.2d 761 (balancing the factors
4 and determining that, under the facts, the plaintiff’s claim “passed the threshold of a
5 submissible prima facie tort” claim).
6 {17} Further, Schmitz states that “prima facie tort may be pleaded in the alternative;
7 however, if at the close of the evidence, [the] plaintiff’s proof is susceptible to
8 submission under one of the accepted categories of tort, the action should be
9 submitted to the jury on that cause and not under prima facie tort.” 1990-NMSC-
10 002, ¶ 48. This is because “double recovery may not be maintained, and the theory
11 underlying prima facie tort—to provide [a] remedy for intentionally committed acts
12 that do not fit within the contours of accepted torts—may be furthered, while
13 remaining consistent with modern pleading practice.” Id. In recognizing the limits of
14 prima facie tort, Schmitz states that “prima facie tort should not be used to evade
15 stringent requirements of other established doctrines of law.” Id. ¶ 63. This limitation
16 has been recognized, restated, and reformulated at various times by this Court. See,
17 e.g., Healthsource, Inc. v. X-Ray Assocs. of N.M., 2005-NMCA-097, ¶ 35, 138 N.M.
18 70, 116 P.3d 861 (stating that “prima facie tort should not lie when the pleaded
19 factual basis is within the scope of an established tort” and affirming the rationale that
11
1 “a prima facie tort claim may not be used as a means of avoiding the more stringent
2 requirements of other torts”); Bogle v. Summit Inv. Co., 2005-NMCA-024, ¶¶ 21-24,
3 137 N.M. 80, 107 P.3d 520 (reversing a prima facie tort judgment because, although
4 the plaintiff was unable to establish a claim under intentional interference with
5 contract, intentional interference with contract was the appropriate claim to bring, and
6 thus “existing causes of action provided reasonable avenues to a remedy for the
7 asserted wrongful conduct”); Ribble, 2003-NMCA-093, ¶¶ 11-12 (recognizing the
8 requirement that “prima facie tort should not be used to evade stringent requirements
9 of other established doctrines of law[,]” but determining that prima facie tort was
10 appropriate because no other accepted tort was pursued (alteration, internal quotation
11 marks, and citation omitted)); Stock v. Grantham, 1998-NMCA-081, ¶¶ 38-39, 125
12 N.M. 564, 964 P.2d 125 (holding that dismissal of the plaintiff’s prima facie tort
13 claim was proper because “[t]he only function of the claim of prima facie tort in [the
14 plaintiff’s] complaint [was] to escape possible restrictions imposed on the torts of
15 intentional infliction of emotional distress and interference with entitlement to
16 unemployment compensation”). Prima facie tort is not “a catch-all alternative for
17 every action that cannot stand on its own legs,” and courts must consider whether a
18 prima facie tort claim is “merely duplicative” of some other claim. Hagebak v. Stone,
12
1 2003-NMCA-007, ¶¶ 27, 29, 133 N.M. 75, 61 P.3d 201 (internal quotation marks and
2 citation omitted).
3 DISCUSSION
4 A. Standard of Review
5 {18} Under Defendants’ pure as-a-matter-of-law approach as to the propriety of
6 prima facie tort, de novo is the proper standard of review. Apodaca v. AAA Gas Co.,
7 2003-NMCA-085, ¶ 15, 134 N.M. 77, 73 P.3d 215 (“Questions of law require de
8 novo review.”). Additionally, the appellate courts review the punitive damages award
9 de novo. Aken v. Plains Elec. Generation & Transmission Coop., Inc., 2002-NMSC-
10 021, ¶¶ 17-19, 132 N.M. 401, 49 P.3d 662 (stating that appellate courts review de
11 novo the constitutionality of a punitive damages award by “mak[ing] an independent
12 assessment of the record”).
13 B. Introductory Setting
14 {19} Before addressing Defendants’ specific arguments, it is important to underscore
15 the difficulty of this appeal both conceptually and under the particular circumstances
16 of this case. This appeal shows how the uncertainties and incongruities of prima facie
17 tort can create trial and appellate conundrums.
18 {20} First, under New Mexico law, an essential element of prima facie tort is that
19 the wrongdoer’s conduct must be lawful. See Schmitz, 1990-NMSC-002, ¶ 37. That
13
1 element was arguably proved in this case given that the district court concluded the
2 termination of the Agreement was proper under an express for-cause provision in the
3 Agreement. The “lawfulness” element exposes analytical tension between tort and
4 contract law—a tension that seems logically irreconcilable when a contract
5 termination, deemed lawful under contract principles, must necessarily at the same
6 time be an unlawful contract termination in prima facie tort. This case shows how
7 problematic a case can be when it involves termination of a contract that implicates
8 both contract and tort claims for relief.
9 {21} Second, how and when prima facie tort can properly be applied suffers from
10 a lack of clarity in our case law. There exists an inherent tension between the
11 recognition of prima facie tort as a valid tort claim that can be alternatively pleaded,
12 on the one hand, and the strict requirements imposed on application of the tort,
13 including that the tort cannot be used to evade established doctrines of law, on the
14 other hand. This tension, as to when prima facie tort ought to be submitted to a jury
15 and when it should not because it evades other established doctrines of law, is
16 highlighted and evidenced by the fact that the three panel members have significantly
17 different views on how this appeal should be decided. This tension is palpable in the
18 present case where Plaintiff may have had a viable contract claim had he properly
19 pleaded and pursued that claim, and where application of a prima facie tort claim
20 could have been shown to be evasive had the parties litigated the case differently.
14
1 Although not specifically highlighted by either party on appeal, that inherent tension
2 has been exacerbated by our case law, which does not clarify when and under what
3 circumstances (1) a doctrine of law is established, and (2) an established doctrine of
4 law is to be considered one that cannot be evaded by the application of prima facie
5 tort.
6 {22} For example, in one instance, this Court held that the existence of an
7 established, but ultimately unproved, claim prohibited submission of prima facie tort
8 to the jury. See Bogle, 2005-NMCA-024, ¶¶ 22-24 (concluding that prima facie tort
9 was prohibited because the plaintiff’s intentional interference with contract claim,
10 although ultimately not meritorious, was appropriate and thus “existing causes of
11 action provided reasonable avenues to a remedy for the asserted wrongful conduct”).
12 In another instance, this Court held that a plaintiff’s decision not to pursue an
13 established tort claim and the defendant’s failure to identify a duplicative claim under
14 an accepted category of tort claims, meant that prima facie tort could proceed to the
15 jury. See Ribble, 2003-NMCA-093, ¶¶ 11-12 (concluding that the plaintiff’s prima
16 facie tort claim was appropriate because no other accepted tort was pursued, although
17 another accepted tort claim was pleaded). The lack of clarity as to the parameters of
18 prima facie tort gives rise to a number of unanswered questions: Should a prima facie
19 tort claim be submitted to a jury if there is some established duplicative claim that
20 exists but was not pleaded? What if a duplicative claim was pleaded but dismissed?
15
1 Does it matter if the duplicative claim was pleaded but dismissed on the merits, as
2 opposed to dismissed for failure to state a claim upon which relief can be granted?
3 Although I do not address all of these questions in this Opinion, this case nevertheless
4 brings these tensions to the surface.
5 {23} Third, the manner in which this case was tried in district court, coupled with
6 all of the aforementioned tensions, forces a result with which I am not particularly
7 comfortable and results in an opinion that will likely be of little value to future parties
8 seeking to resolve whether prima facie tort is appropriate. As stated in the procedural
9 section of this Opinion, the district court dismissed many of Plaintiff’s tort and
10 contract claims, including Plaintiff’s breach of contract claim and breach of the
11 implied covenant of good faith and fair dealing claim based on the court’s ruling that
12 the termination of the Agreement was proper and authorized.5 As a result of that order
13 regarding the appropriateness of the termination, and without objection by
14 Defendants, Plaintiff did not believe that his remaining contract-related or tort claims
15 were viable and decided not to pursue those claims. Thus, by the time the case went
5
16 As stated in the procedural section of this Opinion, the parties apparently
17 agreed that the order, which concluded that the termination was authorized, dismissed
18 the breach of contract claim as well as the breach of the implied covenant of good
19 faith and fair dealing claim. I will explore this interpretation in more detail later in
20 this Opinion, however, for narrative clarity, it is noted here that the parties believe
21 that the court’s order disposed of both contract-related claims as they pertain to
22 wrongful termination, and neither party appealed that order.
16
1 to trial, there were no other tort or contract claims being pursued by or available to
2 Plaintiff that could address the malicious termination carried out by Defendants.
3 {24} I note that there exist differences within the panel in regard to the manner in
4 which this case was tried. The Dissent, which seeks reversal, says that the manner in
5 which the case was tried is “hardly the fault of Defendants.” Dissent infra ¶ 94. The
6 Special Concurrence “see[s] no reason to second-guess the parties’ litigation
7 strategy[,]” Sp. Con. infra ¶ 66, and concludes that “[t]here is nothing to be gained
8 and much to be lost” by second guessing the manner in which the case was tried. Sp.
9 Con. infra ¶ 81. In view of the differences within the panel as to the proper
10 application of prima facie tort and the unfortunate circumstance that viable,
11 established contract-related theories of unlawful termination escaped the attention of
12 the parties and apparently the court, I prefer to highlight the problems, uncertainties,
13 and ambiguities stemming from the application of prima facie tort, and prefer to
14 pointedly limit its application to the facts and circumstances of how this case was
15 tried.
16 {25} Understanding that this case requires resolution despite the problems,
17 uncertainties, and incongruities in the application of prima facie tort, I proceed to
18 discuss why the majority affirms the district court’s submission of prima facie tort to
19 the jury under the circumstances here. I view this Opinion as laying the groundwork
17
1 for our Supreme Court to establish more clarity as to the appropriate application of
2 prima facie tort.
3 C. Defendants’ Approaches
4 {26} I see Defendants’ prima facie tort arguments on appeal as falling within three
5 categories: doctrinal, element-based, and policy-oriented, each presenting purely legal
6 issues. Defendants’ first argument—that Plaintiff’s prima facie tort claim evaded the
7 stringent requirements of multiple established doctrines of law—focuses on the
8 fundamental doctrinal differences between contract law and tort law. Defendants’
9 second argument focuses on the alleged inability of Plaintiff to meet the elements of
10 prima facie tort in light of the district court’s ruling that the contract was properly
11 terminated. Finally, Defendants’ third argument appeals to the practical and policy
12 concerns associated with applying prima facie tort to conduct governed by and lawful
13 under contract law. Each argument is examined in turn.6
6
14 Defendants’ arguments are supported by and expanded upon in an Amicus
15 Curiae brief filed by the Association of Commerce & Industry of New Mexico (ACI).
16 ACI states three points in its appellate brief as to application of prima facie tort:
17 (1) “creates ambiguity and unpredictability in contractual relations, upending long-
18 established business principles and expectations”; (2) “contradicts existing bodies of
19 substantive law”; and (3) “creates a hostile business environment in New Mexico for
20 individuals and businesses, and thereby stifles economic growth and investment[.]”
19 Because ACI’s points largely duplicate Defendants’ arguments on appeal, the points
20 are not addressed in this Opinion.
18
1 1. Defendants’ Doctrinal Approach
2 {27} Defendants first attack the application of prima facie tort in this case on the
3 ground that allowing the claim impermissibly evades stringent requirements of
4 established doctrines of law, as warned against by Schmitz. Within this point,
5 Defendants contend Plaintiff evaded the following doctrines: (1) tort law is based on
6 instances of breach of a legal duty and not on breach of a contractual duty; (2) tort
7 law does not override the right not to contract with others, regardless of motive;
8 (3) tort law cannot be used to rewrite contracts; and (4) tort remedies are not available
9 to remedy the breach of the covenant of good faith and fair dealing. I do not find
10 Defendants’ arguments convincing given the circumstances of this case.
11 {28} First, Defendants assert that torts provide remedies for the breach of duties that
12 arise by law, but torts do not create legal duties. Defendants point out that this
13 “established doctrine” was alluded to in Schmitz, which stated that prima facie tort
14 “provides a remedy for plaintiffs who have been harmed by a defendant’s intentional
15 and malicious acts that fall outside of the rigid traditional intentional tort categories.”
16 Schmitz, 1990-NMSC-002, ¶ 35. Defendants further point to New Mexico case law
17 that “[c]ourts have long followed the rule that the difference between a tort and
18 contract action is that a breach of contract is a failure of performance of a duty arising
19 or imposed by agreement; whereas, a tort is a violation of a duty imposed by law.”
20 Kreischer v. Armijo, 1994-NMCA-118, ¶ 6, 118 N.M. 671, 884 P.2d 827 (alteration,
19
1 internal quotation marks, and citation omitted); see also Cottonwood Enters. v.
2 McAlpin, 1991-NMSC-044, ¶ 11, 111 N.M. 793, 810 P.2d 812 (stating that “the tort
3 of negligence must be based upon a duty other than one imposed by the contract”).
4 Based on the distinction between a legally imposed duty and a contractually imposed
5 duty, Defendants argue that the gravamen of Plaintiff’s prima facie tort claim was the
6 breach of a contractual duty by Defendants, namely, the wrongful termination of the
7 Agreement, not breach of a separate legal duty. Defendants note that the claim was
8 submitted to the jury based on Defendants’ termination of the Agreement, not on any
9 duty imposed by law separate from the obligations described in the Agreement. Thus,
10 Plaintiff “never identified—much less established—a duty created by law (as opposed
11 to one created solely by contract) that [Defendants] breached” with regard to the act
12 of terminating the Agreement.
13 {29} Defendants then turn to Schmitz. According to Defendants, nothing in Schmitz
14 suggests that prima facie tort applies to conduct that is authorized by contract.
15 Defendants argue that Schmitz instead stands for the propositions that the conduct
16 complained of cannot fit into any other established tort category, must fall outside of
17 the rigid traditional tort categories, and cannot be used to evade stringent
18 requirements of other established doctrines of law, including the employment at-will
19 doctrine. Defendants then argue that Schmitz was based on authority from
20 jurisdictions that have held that prima facie tort does not apply to conduct that is
20
1 expressly authorized by contract. Specifically, Defendants rely on cases from New
2 York and Missouri that have held that prima facie tort does not apply to wrongful
3 termination claims in at-will employment scenarios and argue that malicious exercise
4 of a contractual right is generally not an actionable claim. Defendants contend that
5 Schmitz was formulated from tracing the development of prima facie tort in New
6 York and Missouri, see Schmitz, 1990-NMSC-002, ¶¶ 35-48, and that the highest
7 courts in these states have held that prima facie tort does not apply to wrongful
8 termination claims by at-will employees. Defendants rely on Dake v. Tuell, 687
9 S.W.2d 191, 192 (Mo. 1985) (en banc), which held that discharged at-will employees
10 cannot sue for wrongful discharge by “cloaking their claims in the misty shroud of
11 prima facie tort.” Defendants also rely on Murphy v. American Home Products Corp.,
12 448 N.E.2d 86, 91 (N.Y. 1983), which held that the prima facie tort doctrine cannot
13 be used to circumvent the at-will employment doctrine.
14 {30} Defendants attempt to attach to this argument line a logical progression from
15 Vigil v. Arzola, 1983-NMCA-082, ¶ 17, 102 N.M. 682, 699 P.2d 613, rev’d on other
16 grounds by 1984-NMSC-090, 101 N.M. 687, 687 P.2d 1038, which held that the at-
17 will employment “rule rests upon the concept of freedom of contract” and has been
18 described “as permitting an employer to discharge, for good cause, for no cause[,] or
19 even for cause morally wrong, without thereby being guilty of legal wrong.” (Internal
21
1 quotation marks and citation omitted.)7 Defendants support this theme by tracing the
2 Missouri cases of Lundberg v. Prudential Insurance Co. of America, 661 S.W.2d 667
3 (Mo. Ct. App. 1983), and Porter v. Crawford & Co., 611 S.W.2d 265 (Mo. Ct. App.
4 1980), relied on in Schmitz, to language in an early Missouri case, Loewenberg v. De
5 Voigne, 123 S.W. 99 (Mo. Ct. App. 1909). Defendants contend that, according to
6 Porter, 611 S.W.2d at 273, Loewenberg indicated “that no amount of bad intent can
7 render a lawful act actionable in damages” and that under Loewenberg, 123 S.W. at
8 99, even the “malicious” exercise of a contractual right is not actionable and “proof
9 that the thing done was done from the worst of motives will not make the matter
10 complained of actionable.”
7
11 With regard to Defendants’ argument that prima facie tort cannot, in the face
12 of wrongful termination claims, apply in at-will employment scenarios, the majority
13 sees no application here. I agree with Plaintiff that Defendants tried their case on a
14 for-cause theory, willingly abandoned their at-will argument, and cannot now seek
15 to backpedal on their strategic decision. See Gracia v. Bittner, 1995-NMCA-064, ¶ 1,
16 120 N.M. 191, 900 P.2d 351. Likewise not compelling is Defendants’ attempt to
17 circumvent their decision to proceed on a for-cause theory by drawing a parallel
18 between this case and at-will cases, as opposed to arguing that the Agreement was at-
19 will. Defendants have not cited any authority that supports the proposition that parties
20 terminated “for cause” have no “legally protected interest” under prima facie tort.
21 Where a party provides no support for a proposition, the appellate courts assume that
22 none exists. See In re Adoption of Doe, 1984-NMSC-024, ¶ 2, 100 N.M. 764, 676
23 P.2d 1329 (stating that where a party cites no authority to support an argument, the
24 appellate courts may assume no such authority exists); ITT Educ. Servs., Inc. v. N.M.
25 Taxation & Revenue Dep’t, 1998-NMCA-078, ¶ 10, 125 N.M. 244, 959 P.2d 969
26 (stating that this Court will not consider propositions that are unsupported by citation
27 to authority).
22
1 {31} Connecting Schmitz to a later analysis by our Supreme Court in Beavers v.
2 Johnson Controls World Servs., Inc. (Beavers I), 1994-NMSC-094, ¶ 39, 118 N.M.
3 391, 881 P.2d 1376, as to whether its Schmitz rulings could be applied retroactively,
4 Defendants point to Beavers I’s analysis of the importance of reliance in analyzing
5 whether the Schmitz ruling was to be applied retroactively. Defendants read Beavers
6 I to hold that Schmitz applied retroactively because “prima facie tort does not apply
7 where parties rely on the terms of a contract to govern their conduct and to avoid
8 liability[,]” and according to Defendants, “[t]hat is precisely what happened in the
9 present case.”
10 {32} Listed as a separate sub-point, Defendants’ second doctrinal argument is
11 similarly based on freedom of contract. Defendants emphasize the significance of
12 freedom to contract by highlighting our Supreme Court’s public policy determination
13 in Tharp v. Allis-Chalmers Manufacturing Co., 1938-NMSC-044, ¶ 13, 42 N.M. 443,
14 81 P.2d 703, that is, “[I]f there is one thing which more than another public policy
15 requires it is that men of full age and competent understanding shall have the utmost
16 liberty of contracting, and that their contracts, when entered into freely and
17 voluntarily, shall be enforced[.]” (Internal quotation marks and citation omitted.)
18 Defendants also cite United Wholesale Liquor Co. v. Brown-Forman Distillers Corp.,
19 1989-NMSC-030, ¶¶ 8, 13-14, 108 N.M. 467, 775 P.2d 233, which expresses New
20 Mexico’s strong public policy of freedom of contract, stating that “[g]reat damage is
23
1 done where businesses cannot count on certainty in their legal relationships and
2 strong reasons must support a court when it interferes in a legal relationship
3 voluntarily assumed by the parties.” (Internal quotation marks and citation omitted.)
4 In addition, Defendants buttress their policy argument by citing to this Court’s
5 opinion in Quintana v. First Interstate Bank of Albuquerque, 1987-NMCA-062, ¶¶ 6,
6 12, 14, 105 N.M. 784, 737 P.2d 896, which held that “regardless of the motive for its
7 decision[,]” a party has the right “to refuse to do business with [another party,]” and
8 the exercise of that right will not give rise to a claim for tortious interference with
9 contractual or prospective contractual relations because “[t]he right to choose freely
10 one’s business relations has been described as a fundamental right[.]” Defendants
11 then extend New Mexico’s policy favoring freedom of contract to the present case by
12 asserting that courts interpreting New Mexico law have considered freedom of
13 contract and the appropriateness of prima facie tort in the context of termination of
14 at-will employees and independent contractors, and Defendants contend that these
15 courts have properly held that prima facie tort is inapplicable. See Schmitz, 1990-
16 NMSC-002, ¶ 63 (citing Lundberg, 661 S.W.2d at 671); see also Ewing v. State Farm
17 Mut. Auto. Ins. Co., 6 F. Supp. 2d 1281, 1291 (D.N.M. 1998) (recognizing the
18 holding in Schmitz that prima facie tort cannot be used to avoid the employment-at-
19 will doctrine and concluding that “it is unlikely that [prima facie tort] was meant to
24
1 interfere with a company’s prerogative to select its employees or independent
2 contractors”).8
3 {33} Defendants further rely on an unpublished Tenth Circuit Court of Appeals
4 order and judgment in Jackson v. Freightliner Corp., No. 94-2163, 1996 WL 500666,
5 at *4-5 (10th Cir. Sept. 5, 1996) (order), as holding, under New Mexico law,
6 principally Quintana, 1987-NMCA-062, ¶¶ 11-12, that a party is justified in its
7 contractual decisions and prima facie tort cannot be used to modify the absolute right
8 of businesses to choose with whom they want to do business. Defendants offer Smith
9 v. Price’s Creameries, 1982-NMSC-102, ¶¶ 23-24, 98 N.M. 541, 650 P.2d 825, in
8
10 In their brief in chief and apparently as a sub-point to this argument,
11 Defendants include a footnote arguing that there is reversible error based on the
12 district court’s refusal to give a requested instruction on whether the Agreement was
13 terminable at will. As stated in the previous footnote, the majority declines to
14 consider Defendants’ argument. The record reflects that before trial Defendants
15 sought a determination that Plaintiff’s agency was or could have been terminated
16 under an at-will termination provision in the Agreement but that Defendants
17 voluntarily dropped the issue after the court ruled on Defendants’ legal right to
18 terminate Plaintiff. Defendants chose not to pursue their terminable-at-will angle at
19 trial but, rather, based their defense on their right to terminate the agency for cause
20 as a result of Plaintiff’s breach of the Agreement. The district court’s refusal to permit
21 Defendants’ last minute proffer of an instruction on at-will status was appropriate
22 given that Defendants willingly abandoned their at-will theory. Defendants’ last
23 minute attempt to raise the terminable-at-will instruction issue constitutes a case of
24 too little too late, and the matter will not be considered. See Gracia, 1995-NMCA-
25 064, ¶ 17 (“[A]llegations of error that were not preserved in a timely fashion to allow
26 the trial court to correct the error [will] not be the subject of reversal on appeal.”);
27 Woolwine v. Furr’s, Inc., 1987-NMCA-133, ¶ 20, 106 N.M. 492, 745 P.2d 717 (“To
28 preserve an issue for review on appeal, it must appear that [the] appellant fairly
29 invoked a ruling of the trial court on the same grounds argued in the appellate
30 court.”).
25
1 which our Supreme Court determined that there was no need to inquire into the
2 defendant’s motives in seeking to terminate a distributorship contract because the
3 Court had no power to modify the “cancellation ‘for any reason[]’ ” provision and
4 because the plaintiff could not recover even if the defendant terminated the contract
5 in bad faith. Defendants acknowledge that there are some limitations on the freedom
6 of contract but deny that any such limitations apply in this case, and thus, Plaintiff
7 evaded the freedom of contract doctrine in pursuing his prima facie tort claim.
8 {34} Third, Defendants assert that “parties should not be allowed to use tort law to
9 alter or avoid the bargain struck in the contract” and that “[t]he law of contract
10 provides an adequate remedy.” AmRep Sw., Inc. v. Shollenbarger Wood Treating,
11 Inc., 1995-NMSC-020, ¶ 28, 119 N.M. 542, 893 P.2d 438. In addition, Defendants
12 return to Smith, 1982-NMSC-102, ¶¶ 24-26, in which the Court affirmed summary
13 judgment for the defendant and rejected the plaintiff’s claim that a question of fact
14 existed as to whether the contract had been terminated in good faith. Defendants
15 argue from these cases that “[t]he district court erred in using prima facie tort as the
16 vehicle for allowing the jury to rewrite the Agreement to impose a ‘proper motive’
17 limitation on [Defendants’] termination rights.”
18 {35} Fourth and finally within their doctrinal attack, Defendants argue that a breach
19 of the implied covenant of good faith and fair dealing claim and remedies were
20 evaded by submitting prima facie tort to the jury. Defendants contend that New
26
1 Mexico recognizes a claim for breach of the implied covenant of good faith and fair
2 dealing with respect to contracts that are not terminable at will and that the claim
3 sounds in contract, and for that reason, such claims are not subject to tort remedies
4 for the breach. See Bourgeous v. Horizon Healthcare Corp., 1994-NMSC-038, ¶ 17,
5 117 N.M. 434, 872 P.2d 852 (stating that “tort remedies are not available for breach
6 of the implied covenant in an employment contract”).
7 {36} Additionally, Defendants point to United States ex rel. Custom Grading, Inc.
8 v. Great American Insurance Co., 952 F. Supp. 2d 1259, 1269-70 (D.N.M. 2013)
9 (mem.), in which the court dismissed the plaintiff’s prima facie tort claim because
10 “New Mexico law adheres to the economic-loss doctrine,” which “prevents plaintiffs
11 from recovering in tort economic losses to which their entitlement flows only from
12 a contract[.]” (Internal quotation marks and citations omitted.) Defendants argue that,
13 by permitting Plaintiff to proceed with his prima facie tort claim, the district court
14 erred in allowing Plaintiff’s claim “to evade both (i) his burden of proving a breach
15 of the implied covenant and (ii) the contract-damages-only limitation for a breach of
16 the implied covenant[,]” resulting in Plaintiff receiving substantial tort damages “for
17 the lawful exercise of a contractual right.”
18 {37} Defendants’ points regarding the differences between tort and contract
19 doctrines are solid reasons for requiring Plaintiff to have pleaded and pursued
20 contract claims based on a theory that his termination was wrongful, pretextual, and
27
1 carried out with the malicious intent to harm and without sufficient justification. And,
2 in fact, the Dissent looks to the doctrinal differences between tort and contract as
3 providing grounds for reversal. See generally Dissent infra ¶¶ 92, 104. As has been
4 thematic from start to finish in this Opinion, however, the manner in which this case
5 was tried leads to a result that disfavors Defendants’ and the Dissent’s positions. The
6 fact that the jury verdict favored Plaintiff in prima facie tort in effect shows that
7 Defendants chose their for-cause contract clause as a cover for their true intent. As
8 highlighted earlier in the procedural section of this Opinion, Defendants urged and
9 the district court apparently agreed that Plaintiff’s conduct coupled with the plain
10 language of the Agreement allowed Defendants to terminate Plaintiff under the for-
11 cause terms of the Agreement. In deciding the merits of Plaintiff’s contract-related
12 claims, I see no indication that the district court took into consideration or that
13 Plaintiff adequately pleaded or in any way actually pursued9 the argument that the
14 reasons given for his termination were “bogus” and, importantly, the parties
15 apparently agreed that the covenant generally requiring that the parties act in good
16 faith did not apply given the district court’s ruling on the express provision allowing
9
17 Although not raised as an issue on appeal, I question whether Plaintiff’s
18 breach of contract and breach of the implied covenant of good faith and fair dealing
19 claims actually sought recovery based on the alleged wrongful termination. Plaintiff’s
20 operative complaint alleged breach of contract based on Defendants’ conduct during
21 and after the termination (i.e., failure to pay Plaintiff contract value, failure to supply
22 a proper U5 form, and failure to provide meaningful review by the Termination
23 Review Board), not the termination itself.
28
1 termination. Although not raised by either party, I seriously question whether the
2 express language of the Agreement allowing termination or a ruling that Defendants
3 were authorized to terminate pursuant to an express provision in the Agreement
4 necessarily would have prohibited contract-related claims based on pretext or ruse if
5 they had been carefully and clearly pursued.
6 {38} The district court and the parties seemed to believe that in finding that the
7 Agreement could be properly terminated under the facts of this case, as a logical
8 extension, there could be no breach of the implied covenant of good faith and fair
9 dealing. Although breach of the implied covenant cannot be used to negate an express
10 term in a contract, “every contract imposes a duty of good faith and fair dealing on
11 the parties with respect to the performance and enforcement of the terms of the
12 contract.” Sanders v. FedEx Ground Package Sys., Inc., 2008-NMSC-040, ¶ 7, 144
13 N.M. 449, 188 P.3d 1200; see Melnick v. State Farm Mut. Auto. Ins. Co., 1988-
14 NMSC-012, ¶ 17, 106 N.M. 726, 749 P.2d 1105 (agreeing with “those courts that
15 have refused to apply an implied covenant of good faith and fair dealing to override
16 express provisions addressed by the terms of an integrated, written contract”). In the
17 present case, I see no definitive analysis from the district court that the breach of the
18 implied covenant claim was necessarily dismissed in light of any particular ruling. I
19 am not wholly convinced, given the facts supporting bad faith and that Defendants
20 used the Agreement to carry out their malicious motives, that the covenant was so
29
1 easily disposable absent some explicit determination that the covenant did not apply
2 under a contract theory of termination based on pretext or ruse. Had Plaintiff
3 aggressively pursued his “bogus” angle as to Defendants’ stated reasons for
4 terminating Plaintiff by arguing, based on the facts ultimately proved at trial, that
5 Defendants’ true motive was to harm Plaintiff without sufficient justification, we
6 might be in a different situation. I posit that Plaintiff could have pleaded and
7 persuasively argued that his termination was unlawful under breach of contract and/or
8 breach of the implied covenant of good faith and fair dealing on the ground that the
9 termination was nothing more than a pretext or ruse to accomplish the termination
10 based on malicious intent to harm that ends in harm, without sufficient justification.
11 See, e.g., Hartnett v. Papa John’s Pizza USA, Inc., 912 F. Supp. 2d 1066, 1114-15
12 (D.N.M. 2012) (mem.) (denying a motion for summary judgment on the plaintiff’s
13 breach of employment contract claim because there were genuine issues of material
14 fact as to whether the defendant complied with its agreement to terminate the plaintiff
15 for cause); Hunter v. Bd. of Trs. of Broadlawns Med. Ctr., 481 N.W.2d 510, 516
16 (Iowa 1992) (holding that “the jury was entitled to find that [the employer’s] stated
17 reason for discharge—a staff reduction—was pretextuous and thus constituted a
18 breach of contract”); Cannon v. Nat’l By-Products, Inc., 422 N.W.2d 638, 642 (Iowa
19 1988) (stating that, in the context of a breach of an employment contract claim, “the
20 jury could have found that the stated reason for the employer’s termination of [the]
30
1 plaintiff’s employment was not sincere, and the reasons given were pretextuous” and
2 that such findings “should not be disturbed on appeal”); Kestenbaum v. Pennzoil Co.,
3 1988-NMSC-092, ¶¶ 1, 15, 36, 108 N.M. 20, 766 P.2d 280 (upholding a jury verdict
4 based on breach of an employment contract in favor of the plaintiff who could only
5 be terminated for cause and who was not actually terminated for good cause);
6 Kiedrowski v. Citizens Bank, 1995-NMCA-011, ¶¶ 14-15, 119 N.M. 572, 893 P.2d
7 468 (holding that there were genuine issues of material fact that precluded summary
8 judgment on the plaintiff’s breach of contract claim because there were facts to
9 suggest that the employer was motivated by illegitimate and self-serving reasons and
10 terminated the plaintiff under the pretext of poor performance). Had Plaintiff pursued
11 a contract theory that Defendants’ termination of the Agreement was based on pretext
12 and/or a ruse to cover the true, malicious, and unjustified reasons for the termination,
13 I doubt that a ruling from the district court that Defendants were technically
14 authorized to terminate the Agreement pursuant to its express provisions would have
15 been dispositive of Plaintiff’s contract-related claims.
16 {39} I firmly believe that the manner in which this case was tried warrants a decision
17 that cautiously and narrowly affirms but limits the application of prima facie tort to
18 the circumstances in which the clearly viable, available, and established
19 contract-related doctrines of unlawful termination based on pretext, ruse, malice, and
20 lack of justification never came to light. The Special Concurrence disagrees, seeing
31
1 this to simply be a case in which the contract-related claims failed as viable,
2 available, and established contract-related doctrines, notwithstanding that those
3 claims were never based on a theory of an unlawful termination based on pretext,
4 ruse, malice, and lack of justification. See Sp. Con. infra ¶ 80. I believe that had this
5 contract theory been pleaded and pursued, the doctrine of prima facie tort, with its
6 element of a lawful termination instead of lack of such element, would necessarily
7 have been eliminated. The Special Concurrence mistakenly takes the view that a
8 pretextual termination claim and theory of Defendants’ unlawful conduct were before
9 the district court. See Sp. Con. infra ¶ 80. As indicated earlier in this Opinion, they
10 were not. The Opinion’s approach hardly partakes of guess work or musing. Its
11 approach is to show that what happened in this case, i.e., the manner in which this
12 case was tried, centering only on the lawfulness of termination based on Plaintiff’s
13 technical breach, left established, viable contract theories of unlawful pretextual
14 termination unaddressed, thereby leaving no alternative than to send prima facie tort
15 to the jury. Any viable contract theory of unlawful pretextual termination could have
16 overridden any technically “lawful” termination. As indicated earlier, because of the
17 particular nature of this case, no opinion in this case should be considered precedent
18 or authority for any expansion of prima facie tort.
19 {40} I do note that Defendants, in their fourth sub-point, now try to rely on the
20 existence of the covenant of good faith and fair dealing to argue that Plaintiff should
32
1 be prohibited from pursuing a prima facie tort claim. However, Defendants do not
2 provide a cite to the record where this argument regarding Plaintiff’s alleged attempt
3 to evade the requirements of a breach of the implied covenant and its remedies was
4 made before the district court. And based on a review of the record, it does not appear
5 that Defendants developed any argument that Plaintiff had, but failed to pursue, a
6 breach of the implied covenant claim based on a pretextual termination use of the for-
7 cause clause as a cover for the conduct ultimately proved under prima facie tort.
8 Therefore, the majority holds that the argument was not preserved. See In re T.B.,
9 1996-NMCA-035, ¶ 13, 121 N.M. 465, 913 P.2d 272 (“[W]e review the case litigated
10 below, not the case that is fleshed out for the first time on appeal.”); Gracia, 1995-
11 NMCA-064, ¶ 17 (“[A]llegations of error that were not preserved in a timely fashion
12 to allow the trial court to correct the error [will] not be the subject of reversal on
13 appeal.”); Woolwine, 1987-NMCA-133, ¶ 20 (“To preserve an issue for review on
14 appeal, it must appear that [the] appellant fairly invoked a ruling of the trial court on
15 the same grounds argued in the appellate court.”). Even were the majority to
16 determine that Defendants somehow barely preserved this argument by the broad note
17 that Plaintiff’s claim evaded the requirements of a contract claim, consistent with our
18 logic as earlier explained, because Defendants moved to dismiss the implied covenant
19 of good faith and fair dealing claim and were successful in ultimately getting a
20 dismissal of that claim, the majority likewise rejects Defendants’ argument that
33
1 Plaintiff’s use of prima facie tort allowed Plaintiff to evade his burden of proving
2 breach of the implied covenant and the “contract-damages-only” limitation.
3 {41} In addition to concerns with Defendants’ doctrinal position in light of the
4 particular circumstances of this case, the majority does not accept Defendants’
5 argument that contract law can generally provide an adequate remedy at law in
6 circumstances where a termination is carried out pursuant to an express provision in
7 an agreement and when breach of the implied covenant of good faith and fair dealing
8 is unavailable. Defendants sought and agreed to a dismissal of Plaintiff’s breach of
9 the implied covenant claim. Defendants’ position from the start and throughout was
10 that a termination effectuated pursuant to an express clause in a contract should be
11 deemed lawful and not subject to or in violation of the implied covenant of good faith
12 and fair dealing, while simultaneously taking the position that terminating a contract
13 for malicious and unjustifiable reasons is not punishable in tort. Accepting
14 Defendants’ propositions would permit a party to maliciously and unjustifiably
15 terminate a contract under the guise of some technicality without restriction. In
16 Defendants’ ideal world, there would never be a way for a party to obtain relief in for-
17 cause terminations that are technically authorized but nevertheless pretextual and are
18 actually carried out as a ruse and cover for a termination based on malice with intent
19 to harm the terminated party and without justification.
34
1 2. Defendants’ Element-Based Approach
2 {42} Defendants’ second attack is that Plaintiff failed, as a matter of law, to satisfy
3 at least three of the four essential elements of prima facie tort outlined in Schmitz,
4 namely, intent to injure, injury, and absence of justification. See 1990-NMSC-002,
5 ¶ 37. Defendants assert that Plaintiff also failed to satisfy a fifth “unique factual
6 allegations” requirement. Defendants rely on Carreon v. Goodtimes Wood Products,
7 Inc., No. CIV 09-161 BB/CEG, 2011 WL 9686895, *13 (D.N.M. Mar. 22, 2011)
8 (mem.), which states that “a plaintiff cannot simply base [a prima facie tort] claim on
9 the same allegations that support his other claims” and that “the prima facie tort cause
10 of action is useful only when there are factual allegations that are somehow unique,
11 that do not give rise to another tort or contracts claim, but that demand redress.” They
12 also rely on Healthsource, Inc., 2005-NMCA-097, ¶ 36, that affirmed a district
13 court’s dismissal of a prima facie tort claim when the plaintiff did “not assert any
14 separate factual basis to support its prima facie tort claim.”
15 {43} As to the intent to injure and injury requirements, Defendants focus on the
16 United States District Court of New Mexico’s ruling in Hill v. Cray Research, Inc.,
17 864 F. Supp. 1070, 1079-80 (D.N.M. 1991) (mem.), that dismissed the plaintiff’s
18 prima facie tort claim against his former employer either because the termination of
19 the plaintiff’s at-will employment was a breach of an implied contract or a wrongful
20 discharge, and therefore was unlawful and not subject to prima facie tort, or because
35
1 the plaintiff’s termination was lawful and thus there was no intent to injure him.
2 Defendants similarly argue that because they did not breach the Agreement, the intent
3 to injure and injury requirements could not be established given that the intent to
4 injure and injury only apply to a legally protected interest of Plaintiff as required by
5 the Restatement (Second) of Torts § 870, cmt. e, as adopted in Schmitz, 1990-NMSC-
6 002, ¶¶ 46-47. Defendants contend that Plaintiff, as a matter of law, had no legally
7 protected interest once the district court ruled that the Agreement was lawfully
8 terminated. Within this argument, Defendants take the opportunity to reassert their
9 positions (1) that prima facie tort cannot be used to avoid the employment-at-will
10 doctrine, and (2) that it is unlikely that prima facie tort was meant to interfere with a
11 company’s prerogative to select its employees or independent contractors. See id. ¶ 63
12 (recognizing that “prima facie tort cannot be used to avoid employment[-]at[-]will
13 doctrine”); see also Ewing, 6 F. Supp. 2d at 1291 (“[I]t is unlikely that [prima facie
14 tort] was meant to interfere with a company’s perogative to select its employees or
15 independent contractors.”); Yeitrakis v. Schering-Plough Corp., 804 F. Supp. 238,
16 247-49 (D.N.M. 1992) (mem.) (holding that “prima facie tort is unavailable to remedy
17 the termination of an at[-]will employee” (emphasis omitted)). Although Defendants
18 do not argue that this is an employment-at-will situation, they do argue that the same
19 rationale in Schmitz, Ewing, Yeitrakis, and Hill should apply.
36
1 {44} As to the absence of sufficient justification requirement, Defendants argue that
2 conduct that is authorized by contract is justified for purposes of prima facie tort. See
3 Carreon, 2011 WL 9686895, at *13 (stating that if there was no breach of contract,
4 the defendant’s “legal position was justified and cannot be the basis of a claim for
5 prima facie tort”); see also Jackson, 1996 WL 500666, at *5 (affirming dismissal of
6 a prima facie tort claim where the defendant “was justified in withholding consent
7 . . . because it had an absolute right to choose the individuals with whom it wished
8 to have contractual relations”).
9 {45} And as to the unique factual allegations requirement, Defendants reiterate that
10 a plaintiff cannot simply base a prima facie tort claim on the same allegations that
11 would support other claims available or asserted and that the prima facie tort
12 allegations must be unique and not give rise to another tort or contract claim.
13 Defendants argue that an actor’s lawful conduct cannot be brought within or overlap
14 other more traditional categories of liability and that the factual basis for the prima
15 facie tort claim cannot be identical to the factual basis for all of the other alleged
16 claims. Thus, Defendants argue, uniqueness was lacking given that, in setting out his
17 claims for relief, Plaintiff incorporated all of the averments in all of the preceding
18 paragraphs of his complaint, including allegations relating to breach of contract and
19 breach of the implied covenant of good faith and fair dealing, and that the district
37
1 court instructed the jury that Defendants’ termination of the Agreement was the only
2 conduct that could constitute prima facie tort.10
3 {46} Defendants’ argument against the intent to injure and injury elements hinge on
4 Defendants’ employment-at-will-related argument made in their doctrinal appeal and
5 on the district court’s ruling that the termination of the Agreement was authorized.
6 Our rejection of Defendants’ use of the concept earlier in this Opinion likewise
7 applies here. See supra, notes 7-8. Defendants have provided no persuasive case law
8 support for their proposition that the limitation on prima facie tort claims in the
9 employment-at-will arena should apply in the present case. Nor have they for their
10 proposition that “[t]he district court’s ruling that the Agreement was lawfully
11 terminated[] rendered [Plaintiff’s] prima facie tort claim defective, as a matter of law,
12 because he no longer had the legally protected interest needed to satisfy the ‘intent
13 to injure’ element.”
14 {47} The majority also disagrees that Plaintiff failed, as a matter of law, to satisfy
15 the absence of justification requirement. Defendants’ argument that they were
16 justified in terminating Plaintiff simply because the Agreement gave them discretion
10
17 Although Defendants represent that “[t]he jury was specifically instructed
18 that [Defendants’] termination of the Agreement was the only conduct that could
19 constitute prima facie tort[,]” the majority does not read the instruction so broadly.
20 In fact, the jury was instructed that “[i]n order to recover damages from any
21 Defendant on this claim, Plaintiff must show as to that Defendant: [t]hat Defendant
22 intentionally terminated or intentionally took actions that resulted in the termination
23 of [the] Agreement[.]”
38
1 to terminate is unavailing. The primary case cited by Defendants, Carreon, 2011 WL
2 9686895, is factually distinct. In Carreon, the court determined that there were triable
3 issues of fact under breach of contract that precluded submission of prima facie tort
4 to a jury. Id. at *13. In the present case, as I have emphasized throughout this
5 Opinion, as the case was tried, Plaintiff was left with no existing breach of contract
6 claim or contract-related claim. Moreover, Carreon did not conduct the balancing
7 required by Schmitz to determine whether there was sufficient justification. See
8 Schmitz, 1990-NMSC-002, ¶ 46.
9 {48} According to Schmitz, “if a defendant offers a purpose other than the
10 motivation to harm the plaintiff as justification for his actions, that justification must
11 be balanced to determine if it outweighs the bad motive of the defendant in
12 attempting to cause injury.” Id.; see Restatement (Second) of Torts § 870, cmt. c. In
13 balancing the justification offered by Defendants, a fact-finder is required to weigh
14 “[t]he nature and seriousness of the harm to the plaintiff; . . . [t]he fairness or
15 unfairness of the means used by the defendant[s]; . . . [the d]efendant[s’] motive or
16 motives; and . . . [t]he value to [the] defendant[s] or to society in general of the
17 interests advanced by the defendant[s’] conduct.” UJI 13-1631A NMRA. Importantly,
18 the Schmitz Court rejected a higher burden adopted by some jurisdictions that
19 “conduct [must be] done without any beneficial end[.]” Schmitz, 1990-NMSC-002,
20 ¶¶ 45-46 (emphasis added). Defendants have not attacked the sufficiency of
39
1 Plaintiff’s evidence of lack of justification proved in the eyes of the jury. Further, as
2 a matter of law, merely articulating a motivation to terminate the Agreement based
3 on Plaintiff’s contract breach, without weighing Defendants’ alleged bad motives,
4 does not and cannot alone disprove the justification element. Moreover, given that the
5 appellate courts do not reweigh the evidence when considering justification, see
6 Beavers II, 1995-NMCA-070, ¶ 19, and given that the jury was adequately instructed
7 as to the balancing test, the majority declines to hold that Plaintiff failed to satisfy the
8 absence of justification requirement.
9 {49} Also unavailing is Defendants’ argument that prima facie tort, although
10 typically articulated as having four elements, see UJI 13-1631 NMRA, must be
11 dismissed if Plaintiff fails to meet a fifth element—offering unique factual allegations
12 that do not give rise to other tort or contract claims. In support of their contention,
13 Defendants cite to Healthsource, 2005-NMCA-097, ¶ 36. Although Healthsource
14 does state that in prima facie tort the factual allegations must be unique, the majority
15 does not agree that this statement in Healthsource imposes an additional prima facie
16 tort element. Instead, Healthsource was elaborating on a rule found in many New
17 Mexico cases addressing prima facie tort—that “a prima facie tort claim may not be
18 used as a means of avoiding the more stringent requirements of other torts.” Id. ¶ 35;
19 see Stock, 1998-NMCA-081, ¶ 38 (“Prima facie tort should not be used to evade
20 stringent requirements of other established doctrines of law.” (alteration, internal
40
1 quotation marks, and citation omitted)); see also Ribble, 2003-NMCA-093, ¶ 11
2 (same); Hagebak, 2003-NMCA-007, ¶¶ 24, 27, 29 (same). Although pleading
3 identical facts may indicate that a claim is improperly duplicative, as in Healthsource,
4 2005-NMCA-097, ¶ 36, this Court has also “been willing to recognize a prima facie
5 tort claim, even though the conduct in question bore a resemblance to another cause
6 of action.” Hagebak, 2003-NMCA-007, ¶ 27.
7 {50} In the present case, although Plaintiff’s prima facie tort claim bore a
8 resemblance to his other claims in that virtually all of the claims in his complaint
9 were based on the same set of facts, Plaintiff’s prima facie tort claim, as it turned out,
10 was not used to evade stringent requirements of other established doctrines of law.
11 Again, as I have stressed throughout this Opinion’s discussion of the issues, given the
12 way in which the case was tried, there was no other claim available to Plaintiff
13 besides prima facie tort under which to pursue damages resulting from the
14 termination that was malicious and executed with the intent to harm. As expressed
15 earlier, although I am not convinced that Plaintiff, as a matter of law, was necessarily
16 prevented from asserting in contract that Defendants acted in bad faith despite
17 Defendants’ acknowledged legal right to terminate Plaintiff under the contract, the
18 parties’ approach left prima facie tort as the only claim that was susceptible to
19 submission to the jury.
41
1 3. Defendants’ Policy-Oriented Approach
2 {51} Finally, Defendants argue that affirming the judgment would mean that parties
3 who properly perform their contracts face greater exposure than those who breach
4 them. Defendants predict that “[i]f the judgment . . . is affirmed and becomes a part
5 of the law of this [s]tate, the certainty and predictability of contracts will be seriously
6 undermined.” According to Defendants, this is because “[n]o one entering a contract
7 will know whether some jury will later decide that they do not think the bargain
8 struck was fair or they do not feel a party enforced its contractual rights with the right
9 frame of mind.”
10 {52} Defendants argue that with the judgment standing, damages can be
11 significantly greater than those for breach of the Agreement’s termination-at-will
12 provision that limits compensatory damages for breach of the Agreement to three
13 months of commissions. Further, individuals, such as Carroll and Allin, who were not
14 parties to the Agreement can be subject, as they were here, to a million dollar
15 judgment. Defendants assert that “cautious individuals will need to hire their own
16 independent counsel to advise them of the consequences of discharging their job
17 responsibilities even when they scrupulously comply with all relevant contractual
18 requirements.” Defendants point out that, ironically, because contract damages are
19 expressly limited, the danger of being found liable for tort damages would only apply
42
1 if a contract were wholly complied with. Defendants then assert that “tortifying”
2 contracts in this way is not recognized by our courts and is bad law and bad policy.
3 {53} The majority rejects Defendants’ policy-based argument that affirmance of the
4 judgment would (1) mean that parties who properly perform their contracts face
5 greater exposure than those who breach them, and (2) negatively impact the certainty
6 and predictability of contracts in New Mexico.11 The majority does not agree that
7 upholding this prima facie tort verdict, under the peculiar circumstances in this case,
8 generally undermines “the certainty and predictability” of contracts. Because our
9 holding is shaped by the particular circumstances here, as has been explained
10 throughout this Opinion, a limited application of prima facie tort cannot be said to
11 generally threaten New Mexico businesses or their dependence on freedom of
12 contract given the absence at the parties’ insistence of contract claims, combined with
13 Defendants’ clearly egregious tortious conduct under the guise of a legitimate
14 business interest in terminating an agent’s contract. It is our sanguine expectation that
15 business activities do not rise to the egregious level of pretextual, ruse-filled conduct
11
16 The majority also notes that although Amicus’ arguments mostly overlapped
17 with Defendants’ arguments, Amicus did make additional policy-based arguments
18 that accepting Plaintiff’s interpretation of prima facie tort would hinder business in
19 New Mexico because it would produce a “chilling effect,” “create a vacuum of
20 guidance,” increase the cost of business in New Mexico, discourage economic
21 investment, and increase litigation. However, Amicus provides no support for its
22 arguments. The majority therefore declines to consider the merits of the arguments.
23 See ITT Educ. Servs. Inc., 1998-NMCA-078, ¶ 10 (stating that this Court will not
24 consider propositions that are unsupported by citation to authority).
43
1 such as that proved here. The proof required for a successful prima facie tort claim,
2 coupled with the requirement that prima facie tort not be used to evade stringent
3 requirements of other established doctrines of law, confines prima facie tort to a
4 narrow space.
5 THE PUNITIVE DAMAGES ISSUE
6 {54} The appellate courts review de novo the constitutionality of punitive damages,
7 making an independent assessment of the record in order to determine whether the
8 jury’s award of punitive damages is comparatively reasonable. Aken,
9 2002-NMSC-021, ¶¶ 17-19.
10 {55} Defendants argue two reasons why the punitive damages award violated the
11 Due Process Clause of the Fourteenth Amendment. The first is that, under several
12 United States Supreme Court cases, procedural safeguards were required but not
13 implemented. The cases, in the order cited and discussed by Defendants, are Pacific
14 Life Insurance Co. v. Haslip, 499 U.S. 1 (1991), State Farm Mutual Automobile
15 Insurance Co. v. Campbell, 538 U.S. 408 (2003), and TXO Production Corp. v.
16 Alliance Resources Corp., 509 U.S. 443 (1993). The second is that the award does not
17 comport with BMW of North America, Inc. v. Gore, 517 U.S. 559, 574 (1996).
18 {56} The procedural safeguards argument consists of the Haslip requirement that
19 procedural safeguards must be provided for due process purposes, 499 U.S. at 20-22,
20 23 n.11, combined with the ruling in Campbell, 538 U.S. at 417, that “defendants
44
1 subjected to punitive damages in civil cases have not been accorded the protections
2 applicable in a criminal proceeding[,]” even though punitive damages serve the same
3 purposes as criminal penalties. Defendants lay out the concerns expressed in
4 Campbell as to the wide discretion typically left in jury instructions in choosing
5 amounts and that “the presentation of evidence of a defendant’s net worth creates the
6 potential that juries will use their verdicts to express biases against big businesses,
7 particularly those without strong local presences.” Id. (internal quotation marks and
8 citation omitted). And, further, as TXO Products states, “emphasis on the wealth of
9 the wrongdoer increased the risk that the award may have been influenced by
10 prejudice against large corporations, a risk that is of special concern when the
11 defendant is a nonresident.” 509 U.S. at 464.
12 {57} Defendants contend that the jury instructions did not adequately protect them.
13 They argue that a combination of factors led to the jury’s resulting prejudice: (1) the
14 court did not give a proffered instruction that provided further clarification in regard
15 to punitive damages insofar as it required the jury to “consider the punishment and
16 deterrent effect associated with an award of compensatory damages”; (2) the district
17 court allowed evidence of the Companies’ wealth to go to the jury; and (3) in closing
18 argument, Plaintiff’s counsel, “well aware that corporate wealth would poison the
19 jury,” emphasized the collective net worth of the Companies and urged the jury to
20 punish Farmers, a wealthy, out-of-state corporation. Defendants find support in
45
1 Campbell, 538 U.S. at 427, which states that “[t]he wealth of a defendant cannot
2 justify an otherwise unconstitutional punitive damages award.”
3 {58} The second basis for Defendants’ attack on the punitive damages award arises
4 from guideposts set out in both Gore and Campbell. These guideposts are (1) the
5 degree of reprehensibility of the defendant’s conduct, (2) the ratio between
6 compensatory and punitive damages, and (3) a comparison of the punitive damages
7 with criminal or civil penalties that can be imposed for similar conduct. Gore, 517
8 U.S. at 575-84. The Gore guideposts are to be considered within the context of
9 “[e]lementary notions of fairness enshrined in . . . constitutional jurisprudence . . . that
10 a person receive fair notice not only of the conduct that will subject him to
11 punishment, but also of the severity of the penalty that a [s]tate may impose.” Id. at
12 574.
13 {59} Defendants also list five factors for evaluating reprehensibility, taken from
14 Campbell, 538 U.S. at 419, all of which Defendants contend weigh against punitive
15 damages, and Defendants combine with each factor why it was not met.
16 1. Whether “the harm caused was physical as opposed to
17 economic[.]” [Campbell, 538 U.S. at 419. Plaintiff] presented no
18 evidence that he suffered physical harm.
19 2. Whether “the tortious conduct evinced an indifference to or a
20 reckless disregard of the health or safety of others[.]” Id.
21 [Plaintiff’s] Agreement was terminated, in accordance with its
22 terms, because he breached it. This does not implicate health or
23 safety issues for [Plaintiff] or anybody else.
46
1 3. Whether “the target of the conduct had financial vulnerability[.]”
2 Id. Again, [Plaintiff], a sophisticated and experienced insurance
3 agent, presented no evidence that he was uniquely vulnerable. To
4 the contrary, he established that he earned significant income as
5 a Farmers agent and [Plaintiff’s] own expert testified that 40
6 percent of his business was with companies other than Farmers
7 and therefore not impacted by his termination.
8 4. Whether “the conduct involved repeated actions or was an
9 isolated incident[.]” [Id.] The termination of [Plaintiff’s]
10 Agreement was a one-time occurrence, and [Plaintiff’s] evidence
11 was limited to his particular circumstances, and therefore the
12 lawful but allegedly tortious conduct here is incapable of
13 repetition.
14 5. Whether “the harm was the result of intentional malice, trickery,
15 or deceit, or mere accident.” Id. [Plaintiff] never argued that the
16 termination of his Agreement involved trickery or deceit. And,
17 . . . [Plaintiff] failed to prove that [Defendants] bore any malice
18 toward [Plaintiff].
19 {60} Defendants emphasize Campbell’s statement that “[t]he existence of any one
20 of these factors weighing in favor of a plaintiff may not be sufficient to sustain a
21 punitive damages award; and the absence of all of them renders any award suspect.”
22 Id. And further, that there is a presumption that compensatory damages make a
23 plaintiff whole, “so punitive damages should only be awarded if the defendant’s
24 culpability, after having paid compensatory damages, is so reprehensible as to warrant
25 the imposition of further sanctions to achieve punishment or deterrence.” Id.
26 {61} Defendants also argue, in particular, that the ratio of 2.5 times the $1 million
27 compensatory damages award is unconstitutionally excessive, citing Campbell’s view
28 that “[w]hen compensatory damages are substantial, then a lesser ratio, perhaps only
47
1 equal to compensatory damages, can reach the outermost limit of the due process
2 guarantee.” Id. at 425. Defendants further argue that the district court’s having upheld
3 the award, in part, on the basis that seven of Plaintiff’s employees lost their jobs when
4 the Agreement was terminated, was contrary to the express holding in Philip Morris
5 USA v. Williams, 549 U.S. 346, 353-54 (2007), that the award violated due process
6 in punishing the defendant for harm to a non-party. And Defendants argue that there
7 exist no criminal or civil penalties with which to compare the punitive damages award
8 given that Defendants’ legal termination of the Agreement according to its terms
9 violated no law and was not punishable at all, and the district court erred in failing
10 to consider this factor.
11 {62} Although the particular facts of this case and the litigation decisions made
12 again give us pause, in light of our holding that prima facie tort was appropriate in
13 this case, the majority does not agree that the jury instructions regarding punitive
14 damages violated Defendants’ due process rights either by failing to provide
15 procedural safeguards or because the punitive damages award ran afoul of the Gore
16 guideposts or Campbell factors. First, as noted by Plaintiff, our Supreme Court has
17 approved of a punitive damages jury instruction that explains that (1) the jury “ ‘may’
18 award punitive damages[,]” (2) “that the purpose of punitive damages is to punish and
19 deter wrongful conduct[,]” (3) “that the jury should act toward the ends of reason and
20 justice,” and (4) “that punitive damages must relate to actual damages and the injury
48
1 sustained.” Aken, 2002-NMSC-021, ¶ 13. The instruction given in this case fully
2 complied with Aken and, additionally, mirrored New Mexico’s Uniform Jury
3 Instruction regarding punitive damages. See UJI 13-1827 NMRA. The jury was
4 adequately instructed that it may award punitive damages if it found that the conduct
5 of Defendants was malicious. The jury was also instructed as to the nature of the jury
6 instruction—i.e., that the purpose of punitive damages is to punish and deter—and
7 that any award must be based on reason and justice. Finally, the jury was instructed
8 that any award must be reasonably related to the injury and other awarded damages.
9 Thus, the jury instruction provided adequate safeguards and did not violate
10 Defendants’ due process rights. Although presentation of a defendant’s worth may
11 be problematic and result in a large punitive damages award, Defendants have not
12 shown that this jury improperly acted on any prejudice against Defendants because
13 they are or are associated with a big business.
14 {63} Second, the jury’s award complies with the Gore guideposts. Although there
15 are no criminal or civil penalties that can be imposed for Defendants’ conduct, the
16 first two factors are applicable and weigh heavily in favor of Plaintiff. In this case,
17 Plaintiff presented evidence of reprehensible conduct regarding the malicious and
18 intentional treatment of and harm to him. The majority rejects Defendants’ argument
19 that the Campbell factors regarding reprehensibility weigh against a punitive damages
20 award. Defendants’ intentional and malicious behavior toward Plaintiff rightfully
49
1 exposed Defendants to liability. In light of Defendants’ actions and the damage to
2 Plaintiff and given our affirmance of submitting the underlying prima facie tort claim
3 to the jury, the majority holds that the evidence in this case supports a 2.5:1 ratio
4 between the punitive damages award and the compensatory award.
5 CONCLUSION
6 {64} The judgment and post-trial orders entered in the district court are affirmed.
7 {65} IT IS SO ORDERED.
8 __________________________________
9 JONATHAN B. SUTIN, Judge
10 I CONCUR:
11 MICHAEL D. BUSTAMANTE, Judge (specially concurring)
12 J. MILES HANISEE, Judge (dissenting)
50
1 BUSTAMANTE, Judge (specially concurring).
2 {66} I specially concur in Judge Sutin’s Opinion affirming the judgment. I write
3 separately because I see no reason to second-guess the parties’ litigation strategy
4 below. In my view, prima facie tort was invoked and litigated in this case just as our
5 Supreme Court envisioned in Schmitz. I also write to respond to the dissent’s concern
6 that allowing prima facie tort to operate in this context is a threat to freedom of
7 contract.
8 {67} Prima facie tort was not a new concept when our Supreme Court adopted it in
9 Schmitz, 1990-NMSC-002, ¶¶ 36-39. Its roots are found in the scholarly writings and
10 opinions of Justice Oliver Wendell Holmes, Jr. In an early article and a series of
11 lectures later gathered into his book, The Common Law, Holmes organized tort law
12 into the three categories recognized today: liability without fault, negligence based
13 on an objective standard of care, and intentional tort. Oliver Wendell Holmes, Jr., The
14 Theory of Torts, 7 Am. L. Rev. 652 (1872-1873); O.W. Holmes, The Common Law,
15 104-17 (M. Howe ed. 1963). Holmes’ early writing on intentional torts was marked
16 by an attempt to ground liability on a policy-based, objectively determined standard
17 akin to his general theory of negligence. See generally Kenneth J. Vandevelde, A
18 History of Prima Facie Tort: The Origins of a General Theory of Intentional Tort, 19
19 Hofstra L. Rev. 447, 471-76 (1990); Kenneth J. Vandevelde, The Modern Prima
20 Facie Tort Doctrine, 79 Ky. L.J. 519, 521-25 (1990/1991).
51
1 {68} Thirteen years after the publication of The Common Law, Holmes revisited the
2 topic of intentional torts. Oliver Wendell Holmes, Jr., Privilege, Malice, and Intent,
3 8 Harv. L. Rev. 1 (1894). Perhaps influenced by the writings of Frederick Pollock,
4 Holmes took an entirely new approach to the theory of intentional torts. See
5 Vandevelde, supra, at 522-25. Gone was the disjointed discussion of long-recognized
6 causes of action. Focusing on injury to economic interests caused by the trade union
7 movement and by business competitors, Holmes instead posited the “common-place”
8 general proposition that “the intentional infliction of temporal damage or the doing
9 of an act manifestly likely to inflict such damage and inflicting it, is actionable if
10 done without just cause.” Holmes, supra, at 3. Justification would most often be in
11 the form of a claim of privilege. Id. at 9. Claims of privilege would require careful
12 review of the particular circumstances of each case, but in the final analysis would
13 be determined as a matter of policy with courts consciously weighing the advantages
14 to the community in allowing recovery versus allowing the damage to be suffered
15 with no remedy. Id. In weighing claims of privilege, Holmes asserted that courts
16 should consider the nature of the defendant’s acts—including the motive—plus the
17 nature of the consequences and the closeness of the bond between motive and
18 consequences. Id. at 13.
19 {69} As Professor Vandevelde notes, the article marked a shift in Holmes’ thinking.
20 He embraced a general theory of intentional tort. As Holmes made clear, his object
52
1 in the article was “to make a little clearer the method to be followed in deciding [such
2 cases].” Holmes, supra, at 14. And, Holmes “decided that motive, including malice,
3 could be considered by the court in determining whether intentionally injurious
4 conduct was without justification, i.e., whether it was actionable.” Vandevelde, supra,
5 at 523 (emphasis omitted). Thus, in one fell swoop, Holmes proposed a new way of
6 analyzing liability for intentional acts.12
7 {70} It is likely that Holmes saw his idea as a true general theory of intentional torts;
8 an analytical approach which could support existing intentional torts as well as supply
9 a means of dealing with novel factual circumstances. On the Massachusetts bench,
10 he relied on his theory to dissent in two labor relations cases. See Vegelahn v.
11 Guntner, 44 N.E. 1077, 1079-82 (Mass. 1896) (Holmes, J., dissenting); Plant v.
12 Woods, 57 N.E. 1011, 1015-16 (Mass. 1900) (Holmes, C.J., dissenting). In each case,
13 Holmes argued that the injunctions entered against the unions were improper given
14 the social advantages to be potentially gained from their nonviolent acts. In Moran
12
15 Holmes was not writing in a vacuum. The thought that infliction of injury
16 without justification was actionable was articulated in Dexter v. Cole, 6 Wis. 319
17 (1858) and Ricker v. Freeman, 50 N.H. 420 (1870), though neither case involved the
18 type of intentional tort Holmes was addressing. The first articulation of the principle
19 in a setting fitting Holmes’ theory was Walker v. Cronin, 107 Mass. 555 (1871).
20 Walker involved a claim arising from a labor dispute that the defendants induced
21 plaintiff’s employees to leave their job. The Massachusetts Supreme Judicial Court
22 reversed the trial court’s dismissal and remanded for trial noting that “[t]he
23 intentional causing of such loss to another, without justifiable cause, and with the
24 malicious purpose to inflict it, is of itself a wrong.” Id. at 562.
53
1 v. Dunphy, 59 N.E. 125 (Mass. 1901), a case involving a claim that the defendant had
2 induced the plaintiff’s employee to leave, Holmes analyzed the case using only the
3 theory he had expounded in his articles. In addition, he asserted that the court’s prior
4 cases—from Walker through Plant—all agreed with and supported his analytical
5 approach, including the idea that “motives may determine the question of liability[.]”
6 Moran, 59 N.E. at 126.
7 {71} Aikens v. Wisconsin, 195 U.S. 194 (1904), is the most enduring expression by
8 Holmes of his theory. “It has been considered that, prima facie, the intentional
9 infliction of temporal damages is a cause of action, which, as a matter of substantive
10 law, whatever may be the form of pleading, requires a justification if the defendant
11 is to escape.” Id. at 204.13 Aikens involved a constitutional challenge to a state statute
12 making it unlawful to “combine . . . for the purpose of willfully or maliciously
13 injuring another in his reputation, trade, business, or profession, by any means
14 whatever[.]” Id. at 201 (omission in original) (internal quotation marks and citation
15 omitted). Holmes decided the statute was constitutional, in part, by observing “that
16 such a combination, followed by damage, would be actionable even at common law.”
17 Id. at 204. He supported that assertion with an analysis grounded entirely on his
18 general theory.
13
19 It is in my view unfortunate that this quote provided the common name for
20 the tort. Holmes had not used the term before. Perhaps it was the result of his feeling
21 that his approach had been fully accepted. If so, his hubris was misplaced.
54
1 {72} If Holmes’ ambition for his general theory was that it would supplant the
2 established intentional torts, it was not to be. The cases prompting the discussions by
3 Holmes and others involved primarily injuries to economic interests caused by trade
4 unions or business competitors. Holmes’ formulation of a general intentional tort did
5 not find application much beyond that realm even in Massachusetts. Tuttle v. Buck,
6 119 N.W. 946, 948 (Minn. 1909) (holding that setting up a business not for the sake
7 of profit but for the sole purpose of driving another out of business was actionable);
8 see Vandevelde, supra, at 484-95 for a general discussion. New York, for a time,
9 seemed to accept Holmes’ formula and apply it as he might have. Advance Music
10 Corp. v. Am. Tobacco Co., 70 N.E.2d 401, 403 (N.Y. 1946) (explicitly agreeing with
11 Holmes’ formulation in Aikens and holding that an assertion that the defendant’s
12 misrepresentation as to the popularity of certain songs was made with intent to injure
13 the plaintiff stated a cause of action for “a prima facie tort”). But New York’s
14 definition of the tort has devolved into a specific tort so qualified, hemmed, and
15 limited as to make it a legal non-sequitur. See Morrison v. Nat’l Broad. Co., 266
16 N.Y.S.2d 406, 408-09 (App. Div. 1965) (holding that lying to a contestant in a rigged
17 quiz show, thus harming his academic reputation and prospects, did not fit within the
18 definition of prima facie tort), rev’d on other grounds by 19 N.Y.2d 453 (1967).14
14
19 It is possible that New York has now abandoned the requirement that the
20 facts asserted not fit within any other nominate tort. See Bd. of Educ. of Farmingdale
21 Union Free Sch. Dist. v. Farmingdale Classroom Teachers Ass’n, 343 N.E.2d 278,
22 284-85 (N.Y. 1975).
55
1 {73} Missouri’s adoption of the Restatement version of Holmes’ formulation helped
2 to revive his vision, though not as a general theory of intentional tort. Porter, 611
3 S.W.2d at 272. The Restatement formulation echoes Holmes. It states:
4 One who intentionally causes injury to another is subject to liability to
5 the other for that injury, if his conduct is generally culpable and not
6 justifiable under the circumstances. This liability may be imposed
7 although the actor’s conduct does not come within a traditional category
8 of tort liability.
9 Restatement (Second) of Torts § 870. The comments to the section assert that the
10 section “purports to supply [a] unifying principle” for intentional torts and “to explain
11 the basis for the development of the more recently created intentional torts.”
12 Restatement (Second) of Torts § 870 cmt. a. The same comment indicates, however,
13 that the more important work of the section is to “serve as a guide for determining
14 when liability should be imposed for harm that was intentionally inflicted, even
15 though the conduct does not come within the requirements of one of the well
16 established and named intentional torts.” Id. This latter comment reflects the
17 preference courts have shown for discrete, specifically described torts. It also reflects
18 the commonplace that the field of compensable wrongs has not been—nor should it
19 be—closed.
20 {74} If Holmes’ general theory is now limited to considering unnamed intentional
21 wrongs, his most lasting contribution to the law in this area is his discussion of how
22 to consider a defendant’s claim of privilege and justification in the face of aggravated
56
1 conduct. And, in an age when the courts universally recognize the normative
2 functions of the law of torts, Holmes’ consideration of the character of the means
3 used and the subjective motives of the defendant looms especially large. See, e.g.,
4 Saiz v. Belen Sch. Dist., 1992-NMSC-018, ¶ 26, 113 N.M. 387, 827 P.2d 102. The
5 law can and should consider the harm done, the means by which it was done, and the
6 state of mind that motivated the act in deciding whether, as a matter of policy, an
7 injury should go unremedied—whatever the context in which the acts occurred.
8 {75} The Supreme Court was aware of this history when it decided Schmitz. Its
9 discussion at paragraphs thirty-four through fifty-two make clear that it understood
10 the roots, approach, and utility of the tort it was adopting. It consciously adopted
11 Holmes’ analysis—as expressed in the Restatement—as the method New Mexico
12 courts would use to decide when redress is required for injury caused by insufficiently
13 justified, malicious, intentional conduct intended to cause injury.
14 {76} The uniform jury instructions guiding juries faithfully reflect the Supreme
15 Court’s adoption of the Restatement. They place a high burden of proof on the
16 plaintiff to prove intentional acts by the defendant intended to cause harm to the
17 plaintiff. UJI 13-1631. The defendant can plead justification but the plea is subject
18 to a balancing process to “determine if it outweighs any motive of [the] defendant to
19 injure [the] plaintiff.” UJI 13-1631A. The factors to weigh include (1) the nature and
20 gravity of the harm inflicted, (2) the fairness of the means used by the defendant, (3)
57
1 the defendant’s motives, and (4) the value to the defendant or society in general of the
2 interests advanced by the defendant’s conduct. Id. The weighing process allows the
3 parties to argue the policies for and against allowing recovery in a given factual
4 context rather than in a vacuum. Obviously, malicious intent can work to vitiate
5 social utility.
6 {77} Understanding that the tort was intended to operate interstitially, the Supreme
7 Court cautiously limited its application to instances where the facts do not fit
8 crystallized torts, that is, where no other intentional tort provides a remedy. Schmitz,
9 1990-NMSC-002, ¶ 48.15 This limiter has been the source of some uncertainty, and
10 underlies much of Judge Sutin’s concerns. In my view, Schmitz provides a ready
11 answer for this case. Further, given how thoroughly the case was litigated, this is not
12 the appropriate case to address the concerns Judge Sutin raises.
13 {78} Under Schmitz, prima facie tort can be pleaded and litigated in the alternative.
14 But, when it comes to submitting the case to the jury, if the “plaintiff’s proof is
15 susceptible to submission under one of the accepted categories of tort, the action
16 should be submitted to the jury on that cause and not under prima facie tort.” Id. A
17 theory or cause of action is “susceptible to submission” to a jury only if it has escaped
15
18 A persuasive case that this limiter is not necessary has been made by
19 Professor Vandevelde. Vandevelde, supra, at 539-40. Even New York may have
20 abandoned this requirement. But it is not my place to question the Supreme Court’s
21 choice.
58
1 dismissal by summary judgment, directed verdict, or Rule 1-012(B)(6) NMRA.
2 Schmitz, 1990-NMSC-002, ¶ 48.
3 {79} Here, all of Plaintiff’s causes of action other than prima facie tort were
4 dismissed by summary judgment on Defendants’ motions. The dismissed theories
5 were not “susceptible to submission” to the jury. Once the summary judgments were
6 granted, the dismissed causes were not available to Plaintiff as a matter of law.
7 Schmitz cannot be read to require more of litigants or trial courts.
8 {80} This is not a case in which a plaintiff tried to evade other potential causes of
9 action. Plaintiff pleaded all conceivable causes and proceeded to lose them to
10 dismissal at Defendants’ urging. One cause of action is the subject of much
11 discussion and merits response. Judge Sutin theorizes that Plaintiff should have
12 pursued his contract claims more assiduously by arguing that his termination was
13 wrongful and pretextual and thus contrary to the imposed covenant of good faith and
14 fair dealing. Judge Sutin relies on cases such as Kestenbaum, 1988-NMSC-092. The
15 employment termination cases were of no help to Plaintiff. The primary factual issue
16 in those cases was whether there had been a breach of the employee’s contract by the
17 employer; more specifically, whether the plaintiff was fired for actual good cause
18 under their contract. Breach by the employer is the context in which the idea of
19 pretext arose in Kestenbaum and the other wrongful termination cases. Here, there
20 was undeniably a breach of the agency contract—by Plaintiff. Plaintiff’s agency
59
1 placed business with another company, a terminable breach. Once that fact was
2 found, summary judgment on the breach of contract claim in favor of Defendants was
3 inevitable. Using the covenant of good faith and fair dealing to challenge a finding
4 of breach in this context runs the risk of morphing it into a tort-like adjunct to
5 contract law. Perhaps it would be a good idea to start crystallizing such a tort, but its
6 potential impact is much broader than the relatively narrow scope of prima facie tort.
7 This case certainly does not call for the effort or even the discussion.
8 {81} There is nothing to be gained and much to be lost in Judge Sutin’s second-
9 guessing approach. There is no hint in the record or argument by Defendants that
10 Plaintiff “threw the fight” in any of his motion practice. There is no reason for this
11 Court—or the district court—to engage in that inquiry. How is it to be done in any
12 event? Are courts to question motive? (“Did you mean to lose that motion counsel?”).
13 Are they to suggest litigation tactics and arguments to counsel? If so, should both
14 counsel be examined and “counseled,” or only the plaintiff’s attorney? To engage in
15 second-guessing at the appellate level is even more problematic. All we can do is
16 wonder at what was done and why. If the issue was preserved below, there is no need
17 to wonder in a vacuum because the arguments have been made and we can assess
18 them on the record. If the subject of our second-guessing was not preserved or even
19 argued—as is the case here—our musings are perforce of no avail. Absent a
20 miscarriage of justice, we will not disturb a jury verdict. There is certainly no
60
1 miscarriage here. This case involves aggravated facts and serious harm that
2 Defendants do not dispute. We are left to musing about how counsel should have
3 been smarter and worked harder, all to no discernible end.
4 {82} In sum, the case was vigorously litigated. There is no need or reason to revisit
5 how it was litigated. Subject to Defendants’ failed motion to dismiss prima facie tort,
6 all parties agreed at the end that only prima facie tort was left to be submitted to the
7 jury. The jury has spoken.
8 THE DISSENT
9 {83} I disagree with the dissent’s assertion that the factual circumstances here are
10 exempt from the purview of prima facie tort simply because they arose in the context
11 of a contractual relationship between the parties. The dissent argues for a categorical
12 exemption from tort liability, regardless of behavior and motive. The cases cited by
13 the dissent do not support such an exemption and its ipse dixit policy argument
14 ignores the lesson and point of Holmes’ work on which it purports to rely.
15 {84} First, the cases the dissent relies on simply do not support a categorical
16 exemption. Guest v. Allstate Insurance Co. did hold that an attorney could not claim
17 future, unearned fees as an item of damage from a former client. 2010-NMSC-047,
18 ¶ 25, 149 N.M. 74, 244 P.3d 342; see Dissent infra ¶ 100. The basis for ruling—the
19 need to protect the attorney/client relationship—says nothing about the propriety of
61
1 immunizing an entire field of human activity from scrutiny for wrongdoing.16 And
2 Andrews v. Stallings, 1995-NMCA-015, 119 N.M. 478, 892 P.2d 611, is a run-of-the-
3 mill case in which the defamation claim was the appropriate tort to pursue. See
4 Dissent infra ¶ 101.
5 {85} Second, the dissent misconstrues Holmes’ theory in his article Privilege,
6 Malice, and Intent. Holmes’ effort in the article was to posit a general theory of
7 intentional tort useful as a method for analyzing claims for injury caused by
8 intentional acts. He did not posit any specific outcomes in cases. He did note that
9 some policies—such as the free use of land—were so ingrained in the law and society
10 that they were likely to provide justification no matter what motive an actor had for
11 use of land.17 But Holmes did not say that even such uses should be forever free from
12 scrutiny or liability. The dissent ignores its own quote from Holmes’ article “When
13 the question of policy is faced[,] it . . . cannot be answered by generalities, but must
14 be determined by the particular character of the case . . . plainly the worth of the
16
15 It is notable, though not relevant here, that no one in Guest saw any difficulty
16 in allowing the plaintiffs’ contract claims and the prima facie tort claims to both go
17 to the jury.
17
18 It should be noted, however, that even the free use of land had its limits at
19 common law. It was subject to challenge as a nuisance. And the case of Fletcher v.
20 Rylands, 3 H. & C. 774, 159 Eng. Rep. 737 (1865)—the basis for strict liability for
21 hazardous activities—involved a water reservoir which failed, flooding a neighbor’s
22 mine.
62
1 result, or the gain from allowing the act to be done, has to be compared with the loss
2 which it inflicts.” Holmes, supra, at 3.
3 {86} Defendants and the dissent refuse to engage the “particular character of the
4 case” or to conduct a comparison of gain and loss in light of motive. The facts in this
5 case are egregious. After a very successful eleven-year career as a “stellar agent” for
6 Defendants, Plaintiff was summarily terminated after one mistake which was quickly
7 remedied. The motive for the termination could range from petty bureaucratic revenge
8 to unmitigated greed. As a result of his termination, Plaintiff lost all income from the
9 business. His clients and commissions were distributed to the persons who carried out
10 the termination. And all of this occurred while Plaintiff’s wife was away for an
11 extended time with a serious kidney disease. In effect, the jury found that the
12 individuals who effected the firing acted like corporate hyenas and jackals
13 cannibalizing their own. I see no reason to say that Plaintiff should “have expected
14 as much” when he signed his agency agreement.
15 {87} There is no question Defendants intended the firing and the harm. As to
16 justification, Defendants’ only response is “because we can.”18 But, as the court in
17 Plant noted, that “proposition is a mere truism.” 57 N.E. at 1014. Immunity for
18 intentional, harmful conduct requires an inquiry into motive. As Holmes noted in his
18
19 Defendants’ position is Nixonian: “If the president does it, it’s legal.”
63
1 article, “It is entirely conceivable that motive, in some jurisdictions, should be held
2 to affect all, or nearly all, claims of privilege.” Holmes, supra, at 9. The jury found
3 Defendants’ motive to be malicious, and their conduct inexcusable. Defendants fail
4 to appreciate that the tort and verdict address that conduct and motive. The
5 termination itself works primarily to provide a measure of damages.
6 {88} Defendants’ argument that this verdict will undermine “freedom of contract”
7 may be addressed by the fourth factor under UJI 13-1631A: “The value to [the]
8 defendant or to society in general of the interests advanced by the defendant’s
9 conduct.” But Defendants do not—cannot—explain how allowing petty bureaucratic
10 revenge or greed to motivate and control their relationship with their agents is
11 necessary to its business model or its success. Defendants do not—cannot—explain
12 how shielding the egregious conduct present here is important to them or what value
13 it contributes to society in general. Defendants do not—cannot—explain how
14 immunizing hyena-like behavior is necessary to defend freedom of contract.
15 Defendants do not attempt to explain because any arguments made would be specious
16 on their face. In this context, Defendants’ assertion of “freedom of contract” is not
17 just a cliche; it is a shibboleth.
18 {89} More generally, Defendants’ assertion of freedom of contract fails to take into
19 account other developments in the law that are aimed at ameliorating the potential for
20 the law of contract to devolve into the law of the jungle. Internal to the world of
64
1 contract, the law imposes the implied covenant of good faith and fair dealings. Cont’l
2 Potash, Inc. v. Freeport-McMaron, Inc., 1993-NMSC-039, ¶ 64, 115 N.M. 690, 858
3 P.2d 66. The covenant makes subjective motive and “right conduct” part of the
4 conversation when assessing breaches of contract. This law has not destroyed
5 freedom of contract, though it probably humanizes it. Prima face tort can do the same.
6 {90} In the insurance field, the courts have created the tort of bad faith. See UJIs13-
7 1701 to -1705 NMRA. The obligations imposed on insurers by common law bad faith
8 concepts are much broader than anything that might be imposed by prima facie tort.19
9 The torts of economic duress and interferences with contractual relations have their
10 own potential to interfere with freedom of contract. But they were recognized in
11 response to inappropriate behavior in the economic realm. See Terrel v. Duke City
12 Lumber Co., 1974-NMCA-041, ¶ 97, 86 N.M. 405, 524 P.2d 1021 (recognizing tort
13 of economic duress), aff’d in part and rev’d in part on other grounds by 1975-
14 NMSC-041, 88 N.M. 299, 540 P.2d 229; see also Wolf v. Perry, 1959-NMSC-044,
15 ¶ 15, 65 N.M. 457, 339 P.2d 679 (recognizing tortious interference with contract).
16 They have not destroyed freedom of contract and neither will this verdict.
17
18 MICHAEL D. BUSTAMANTE, Judge
19
19 One wonders how an insurer would fare in an action by one of its insureds
20 alleging the type of callous and cruel behavior visited on Plaintiff here.
65
1 HANISEE, Judge (dissenting).
2 {91} Today’s majority injects the specter of prima facie tort liability into commercial
3 relationships governed first by contracts and, when necessary, doctrinal contract law.
4 In upholding the jury’s verdict, the majority authors downplay the requirements of
5 existing and directly applicable causes of action—not only in contract but also in tort.
6 The end result is that Defendants’ right to enforce and terminate an indisputably
7 breached contract that neither violates public policy nor is a contract of adhesion is
8 negated.
9 {92} Confusingly, Judge Sutin agrees that there “are solid reasons for requiring
10 Plaintiff to have pleaded and pursued contract claims based on a theory that his
11 termination was wrongful, pretextual, and carried out with the malicious intent to
12 harm and without sufficient justification.” Op. supra ¶ 37. He also agrees that
13 “Plaintiff could have pleaded and persuasively argued that his termination was
14 unlawful [as a] breach of contract and/or breach of the implied covenant of good faith
15 and fair dealing[.]” Op. supra ¶ 38. And Judge Bustamante allows that our Supreme
16 Court “cautiously limited [prima facie tort’s] application to instances where the facts
17 do not fit crystallized torts[.]” Sp. Con. supra ¶ 77. Why, then, does the jury’s verdict
18 stand when it seems we agree that it is hornbook law that prima facie tort may not be
19 used to “evade stringent requirements of other established doctrines of law[?]”
20 Schmitz, 1990-NMSC-002, ¶ 63; see also Stock, 1998-NMCA-081, ¶ 38 (holding that
66
1 prima facie tort may not serve to “escape possible restrictions” to another tort’s
2 applicability).
3 {93} Judge Sutin suggests that the reason is “the particular manner in which this
4 case was tried,” Op. supra ¶ 3, and “the peculiar circumstances in this case[.]” Op.
5 supra ¶ 53. While true that “there was no other claim available to Plaintiff besides
6 prima facie tort under which to pursue damages” from Defendants, Op. supra ¶ 50,
7 such was the circumstance only because, by the time of trial, Defendants had defeated
8 Plaintiff’s numerous directly applicable causes of action. So the only reason this case
9 was tried at all is because the district court denied Defendants’ motion for summary
10 judgment on Plaintiff’s prima facie tort claim. Hence, the lead opinion’s justification
11 for the occurrence of a trial on what was left of a disemboweled complaint—loudly
12 “sounding in contract and tort[,]” Op. supra ¶ 9—begs the question of whether the
13 district court erred in denying the last of an otherwise successful series of dispositive
14 motions filed by Defendants.
15 {94} The occurrence of such an atypical trial, however, is no reason to affirm its
16 outcome and in any event is hardly the fault of Defendants. To the contrary, Plaintiff
17 was “the master of [his] complaint,” Self v. United Parcel Serv., 1998-NMSC-046,
18 ¶ 17, 126 N.M. 396, 970 P.2d 582 (internal quotation marks and citation omitted), and
19 likewise possessed sole control over whether to appeal the district court’s dismissal
20 of his contract- and tort-based claims. Yet Plaintiff chose not to plead the claims that
67
1 Judge Sutin suggests he “could have pleaded and persuasively argued[,]” Op. supra
2 ¶ 38, and did not appeal from the district court’s summary judgment in Defendants’
3 favor on the predicate claims he did choose to plead. To uphold Defendants’ liability
4 under a legal doctrine of such limited applicability rings hollow, particularly given
5 Judge Sutin’s additional observation that the “express language of the Agreement”
6 would not have necessarily “prohibited contract-related claims based on pretext or
7 ruse if they had been carefully and clearly pursued.” Op. supra ¶ 37 (emphasis
8 added). Yet by some kind of judicial alchemy, the majority today turns Defendants’
9 right to terminate the Agreement into liability for its exercise of that right, and
10 Plaintiff’s litigation failures (and his own breach of the Agreement) into a damages
11 bonanza paid for by Defendants.
12 {95} Even less availingly, Judge Bustamante appears to seek an independent, stand-
13 alone standard for application of prima facie tort: “egregious conduct[.]” Sp. Con.
14 supra ¶ 88 . He would declare corporate behaviors ranging from “petty bureaucratic
15 revenge to unmitigated greed[,]” Sp. Con. supra ¶ 86, to be damages-eligible, a zone
16 of liability into which Defendants’ “hyena-like” and “jackals cannibalizing their
17 own[,]” behaviors fall. Sp. Con. supra ¶¶ 86, 88. Under Judge Bustamante’s
18 approach, district courts are to undertake a free-ranging assessment of a defendant’s
19 conduct in deciding if a prima facie tort claim is to be submitted to a jury, even when
20 “crystalliz[ed,]” Sp. Con. supra ¶ 80, but element-rich causes of action fail on legal
68
1 grounds. Future plaintiffs might wonder why they should bother to plead on-point but
2 proof-onerous causes of action. Which is exactly why the application of prima facie
3 tort in New Mexico was tightly curtailed from the get-go, and has so remained. See
4 Stock, 1998-NMCA-081, ¶ 39 (“[T]he [plaintiff’s] claim of prima facie tort is
5 duplicative of her other claims. But to the extent that it is not, we hold that
6 application of that doctrine . . . would be an improper means of evading proof of
7 essential, and appropriate, elements of those other claims.”).
8 {96} Ultimately, the majority authors and I fundamentally disagree about prima facie
9 tort’s place in New Mexico law. The tort was not created, nor were its elements
10 designed, to serve as an infill upon which a plaintiff can erect a remedy when
11 otherwise applicable torts or contract law do not afford redress. Quite the opposite:
12 that a plaintiff is precluded from recovering under a different cause of action is often
13 itself sufficient to demonstrate the inapplicability of prima facie tort. This conclusion
14 flows from a proper historical understanding of the tort and the genesis of Schmitz’s
15 “evasion” requirement. See 1990-NMSC-002, ¶ 63; see also James P. Bieg, Prima
16 Facie Tort Comes to New Mexico: A Summary of Prima Facie Tort Law, 21 N.M. L.
17 Rev. 327, 371 (1991) (expressing caution that “prima facie tort has the potential of
18 eliminating the important policies and protections embodied in the elements of
19 traditional torts, many of which have been developed over centuries, and replacing
20 them with a nebulous, all-encompassing, and formless cause of action”).
69
1 {97} While Judge Bustamante rightly connects the origins of much of the framework
2 of existing tort law to the work of Justice Holmes, his perspective regarding prima
3 facie tort is incomplete. Indeed, Holmes rejected a formalist regime of tort liability
4 and set out a more general theory for deciding cases where a plaintiff alleges that he
5 has been injured by the defendant.
6 Actions of tort are brought for temporal damage. The law recognizes
7 temporal damage as an evil which its object is to prevent or to redress,
8 so far as is consistent with paramount considerations to be mentioned.
9 When it is shown that the defendant’s act has had temporal damage to
10 the plaintiff for its consequence, the next question is whether that
11 consequence was one which the defendant might have foreseen. If
12 common experience has shown that some such consequence was likely
13 to follow the act under the circumstances known to the actor, he is taken
14 to have acted with notice, and is held liable[.]
15 Holmes, Privilege, Malice, and Intent, supra at 1 (cited in Schmitz, 1990-NMSC-002,
16 ¶ 36). To Holmes, the only question in determining whether to exempt a defendant
17 from liability for damages to the plaintiff caused by the defendant’s malicious acts is
18 whether the defendant’s actions, however malicious, may be justified or
19 “privilege[d].” Holmes, supra, at 9. And whether a defendant’s acts are privileged is
20 ultimately a question of “policy; and the advantages to the community, on the one
21 side and the other, are the only matters really entitled to be weighed.” Id. Under
22 Holmes’ theory, the question of whether the defendant is privileged to inflict a harm
23 “cannot be answered by generalities, but must be determined by the particular
24 character of the case, even if everybody agrees what the answer should be. . . .
70
1 [P]lainly the worth of the result, or the gain from allowing the act to be done, has to
2 be compared with the loss which it inflicts.” Id. at 3.
3 {98} But “[i]t seems inevitable that a tort conceived on the principle of prima facie
4 liability for intentional infliction of harm would come to encroach upon bodies of
5 law, like contract, which have more limited principles of liability.” Mark P. Gergen,
6 Tortious Interference: How It Is Engulfing Commercial Law, Why This Is Not
7 Entirely Bad, and A Prudential Response, 38 Ariz. L. Rev. 1175, 1218 (1996). Hence
8 the import of Schmitz’s use of the phrase “established doctrines of law.” 1990-
9 NMSC-002, ¶ 63 (emphasis added). The elements of a claim merely express the
10 requirements of the underlying doctrine of substantive law that provides a remedy.
11 It follows, then, that Plaintiff’s inability to plead or prevail on a claim for breach of
12 contract (or tortious interference with the Agreement into which the parties entered)
13 may itself be a reason to question whether a claim for prima facie tort should be
14 submitted to the jury. In other words, the fact that a plaintiff cannot obtain relief for
15 injuries caused by the defendant in an action for breach of contract is evidence that
16 the defendant was justified or privileged to cause the plaintiff’s injuries. Gergen,
17 supra, at 1221 (noting that if a claim “[falls] deeply in the shadow of another body
18 of law,” consideration should be given to determining whether dismissal is necessary
19 in order to “preserve the priority of that other body of law”).
71
1 {99} Even Holmes evolved to limit his preferred generalized approach to tort
2 liability by use of the term “disinterested malevolence,” Am. Bank & Tr. Co. v.
3 Federal Bank, 256 U.S. 350, 358 (1921), penned to mark the liability distinction
4 between actions of right that cause harm and actions undertaken solely to cause harm.
5 That notion is evident in Aikens itself, when Holmes addressed the unique state of
6 mind that exists when harm is inflicted “for the sake of the harm as an end in itself,
7 and not merely as a means to some further end legitimately desired.” Aikens, 195 U.S.
8 at 203; see also Marcella v. ARP Films, Inc., 778 F.2d 112, 119 (2d Cir. 1985)
9 (“[W]hen there are other motives, such as profit, self-interest, or business advantage,
10 there is no recovery under the doctrine of prima facie tort.”). Here, regarding
11 Defendants’ termination of the Agreement with Plaintiff, the trial record amply
12 supports business, profit, and associative motives far beyond disinterested
13 malevolence.
14 {100} The historic limitation of prima facie tort’s application, intended by Schmitz,
15 finds support in our case law. In Guest, 2010-NMSC-047, ¶¶ 47-56, our Supreme
16 Court held on public policy grounds that a client is not liable to his lawyer for lost
17 future earnings when the client terminates the attorney-client relationship. The
18 attorney-plaintiff in Guest contended that even if lost future earnings were not
19 available in a breach of contract action, they were nonetheless available in an action
20 based on prima facie tort. Id. ¶ 57. Our Supreme Court disagreed, holding that “these
72
1 claims arose out of the same circumstances as [the attorney-plaintiff’s] contract
2 claim—her employment relationship with [the defendant]—[so the] reasoning applies
3 regardless of the theory of liability.” Id. This statement supports my view that if a
4 plaintiff cannot prevail on breach of contract or the covenant of good faith and fair
5 dealing for a good reason, then the plaintiff should not be allowed to prevail on a
6 prima facie tort claim for the same reason—even when the formal elements of a prima
7 facie tort claim are found by a jury to have been proven.
8 {101} This Court upheld the dismissal of a prima facie tort claim for similar reasons
9 in Andrews, 1995-NMCA-015. In that case, we upheld the district court’s dismissal
10 of the plaintiffs’ intentional infliction of emotional distress claim, reasoning that the
11 claim was an “attempt[] . . . to make an end-run around the obstacles posed by
12 defamation law’s harm to reputation element and its constitutional aspects.” Id. ¶ 48
13 (internal quotation marks and citation omitted). With respect to the plaintiffs’ prima
14 facie tort claim, we analyzed Schmitz’s “evasion” rule from a similar standpoint:
15 “[whether plaintiffs’] prima facie tort is being asserted merely to circumvent the
16 established defenses to defamation.” Id. ¶ 64. In other words, we looked at the
17 normative value of defamation (and its defenses) as the means of redress for harm
18 caused by written statements. And we concluded that it outweighed the need to
19 provide the plaintiffs with a secondary avenue by which liability might be established
20 premised upon the harm caused by the defendants’ acts. Id. ¶ 67.
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1 {102} Holmes understood this issue as a question of privilege: when the benefits to
2 society of requiring a plaintiff to proceed (and lose) under an established theory of
3 law outweigh the benefits of allowing the plaintiff to recover for prima facie tort, we
4 are in essence recognizing that the defendant has a privilege to harm the plaintiff. The
5 example Holmes used is “the right to make changes upon or in a man’s land[.]”
6 Holmes, supra at 4. Even if a man makes changes to his own land with malicious
7 intent to harm his neighbor, Holmes reasoned that the need to compensate the
8 neighbor and punish the defendant for his malice would be outweighed by society’s
9 interest in encouraging landowners to invest in and develop their property. Id. “Were
10 it otherwise, and were the doctrine carried out to its logical conclusion, an expensive
11 warehouse might be pulled down on the finding of a jury that it was maintained
12 maliciously, and thus a large amount of labor might be wasted and lost.” Id.
13 {103} The straightforward question here is whether an existing and applicable
14 doctrine of law requires us to decide this case in Defendants’ favor, despite their
15 concession on appeal that they acted with an intent to (and did indeed) harm Plaintiff.
16 As Judge Sutin points out, Defendants’ argument on this issue boils down to a
17 straightforward contention that the jury’s verdict, if allowed to stand, would fatally
18 undermine the maxim of contract law that “public policy encourages freedom
19 between competent parties of the right to contract, and requires the enforcement of
20 contracts, unless they clearly contravene some positive law or rule of public morals.”
74
1 General Elec. Credit Corp. v. Tidenberg, 1967-NMSC-126, ¶ 14, 78 N.M. 59, 428
2 P.2d 33. Judge Sutin dismisses this argument out of hand, concluding that
3 Defendants’ argument paints an “ideal[ized]” picture of a world in which there is
4 “[no] way for a party to obtain relief in for-cause terminations that are technically
5 authorized but nevertheless pretextual[.]” Op. supra ¶ 41. And the concurring opinion
6 seems to prefer that freedom of contract be vaguely “humanize[d.]” Sp. Con. supra
7 ¶ 89. But this is just a preference that applicable law incorporate considerations that
8 it does not. Should we allow a plaintiff to obtain damages for harm caused by the
9 exercise of an express term in a contract when that contract does not violate any
10 public policy and is not one of adhesion? In upholding the jury verdict in this case,
11 the majority authors do not answer this difficult (and to my mind, insurmountable)
12 question.
13 {104} The public policy favoring the freedom of private parties to set the terms of
14 their commercial relationships should not be discarded if a defendant’s conduct, even
15 if both legal and expressly contemplated by the contract, is by judicial measure
16 sufficiently outrageous. The worn phrase “freedom of contract” may be cliché, but
17 that does not mean we should ignore its application in this case. Bad blood and failed
18 business ventures often keep close company. Courts should not sit in equity on claims
19 arising from commercial relationships that wouldn’t exist but for written contracts.
20 Where the terms of a contract are clear—as here—we enforce them as written. The
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1 parties would have expected as much when they entered the Agreement. I would
2 reverse the district court’s denial of Defendants’ post-trial motion for a directed
3 verdict on Plaintiff’s prima facie tort claim. I therefore respectfully dissent.
4 __________________________________
5 J. MILES HANISEE, Judge
76