United States District Court, Northern District of Illinois, E.D
May 11, 1982
INTERNATIONAL ADMINISTRATORS, INC., PLAINTIFF,
LIFE INSURANCE COMPANY OF NORTH AMERICA, DEFENDANT.
The opinion of the court was delivered by: Shadur, District Judge.
MEMORANDUM OPINION AND ORDER
International Administrators, Inc. ("IAI") and its president, Sheldon
Harrison ("Harrison") sue Life Insurance Company of North America
("LINA") in 12 counts claiming interference with IAI's contractual
relationships, interference with prospective advantage, breach of
contract and defamation. LINA has moved to dismiss the Complaint for
failure to state a cause of action. For the reasons contained in this
memorandum opinion and order, LINA's motion is granted as to Count VIII
and Counts X-XII and is denied as to all other Counts.*fn1
Counts I to V
Complaint Counts I-V assert claims of interference with IAI's
contractual relations with the Iowa Department of the American Legion
(the "Iowa Legion"). Beginning in 1971 IAI was broker and administrator
for various group insurance programs of the Iowa Legion and its Ladies'
Auxiliary. In that capacity it placed a substantial part of that coverage
with LINA beginning in 1976.
Then the Complaint alleges that in March 1981 (Ct. I, ¶ 12; Ct.
II, ¶ 6; Ct. III, ¶ 4; Ct. IV, ¶ 4; Ct. V, ¶ 3 state
slightly different variants):
LINA communicated with [the Iowa Legion] and
intentionally acted in a way calculated to cause
damage to [IAI] by use of intimidation, force,
coercion and misrepresentation and threats to [the
Iowa Legion] with the malicious intent of preventing
[IAI] from fulfilling its contract with [the Iowa
Legion] and with the intent to induce [the Iowa
Legion] not to continue a valuable business
relationship with [IAI].
Two letters (Ex. D and E) from LINA to the Iowa Legion are attached to
the Complaint as evidence of LINA's illegal interference. Those identical
letters, written to two Iowa Legion officials, state that:
(1) LINA "ha(s) not received certain premiums on
policies . . . that were due as far back as
September, 1980," although the premiums had been
"collected by your broker, Mr. Sheldon Harrison . . .
but have not been remitted to" LINA.
(2) Because Harrison was the Iowa Legion's
"appointed broker, we are in a position that forces us
to terminate our relationship with your organization
as long as he is your representative."
(3) LINA meant the letters as "an intent to cancel"
the hospital indemnity coverage as of May 1, 1981.
As a direct result of such actions by LINA, the Complaint concludes,
the Iowa Legion cancelled its broker contract with IAI. This action
In this diversity action, Illinois law provides the substantive rule of
decision. LINA invokes Connaughton v. Gertz, 94 Ill. App.3d 265, 269, 49
Ill.Dec. 838, 841, 418 N.E.2d 858, 861 (1st Dist. 1981) to claim its
interference with IAI's contract was "privileged." Because a defendant's
intentional and unjustified inducement must be part of plaintiff's prima
facie case (id. at 269, 49 Ill.Dec. at 841, 418 N.E.2d at 861) LINA seeks
dismissal of Counts I to V.
Connaughton teaches the existence of a "privilege to interfere" rests
on two factors (id. at 270, 49 Ill.Dec. at 841, 418 N.E.2d at 861):
(1) Defendant must have brought about the breach of
plaintiff's contract by acting to protect a
conflicting interest considered under the law to be of
a value equal to or greater than plaintiff's rights.
(2) Defendant's acts in inducing the breach must
have been legal and not unreasonable under the
In applying those principles it states (id. at 270, 49 Ill.Dec. at 842,
418 N.E.2d at 862):
In most cases, conflicting contractual rights stand on
an equal plane. Generally, when A has a valid contract
with C, and C enters into a contract with B, and the
enforcement of A's contract depends on the
non-enforcement of B's contract A is privileged to use
any reasonable means to bring about a breach of B's
contract with C to protect his own interest.
Connaughton does not compel dismissal for at least two reasons. First,
the Complaint does not make unavoidable the conclusion that enforcement
of LINA's contract "depended on" the breach of IAI's brokerage agreement
with the Iowa Legion. Second, the Complaint alleges LINA acted "by use of
intimidation, force, coercion, and misrepresentation and threats" in its
inducement to the Iowa Legion. Under the second branch of the
Connaughton test such wrongful conduct by LINA, if proved by IAI, would
negate LINA's claim of "privilege" even if otherwise appropriate.
Even though Exhibits D and E, standing alone, cannot establish IAI's
claim, no federal litigant is required to plead all its evidence.
Fed.R.Civ.P. 8(a) instructs exactly the opposite.*fn3 On LINA's motion
to dismiss, this Court is bound to take IAI's averments of
"intimidation, force, coercion, misrepresentation and threats" as true
and made in good faith. LINA's motion must fail as to Counts I to V.
Counts VI and VII
Counts VI and VII withstand LINA's motion on similar grounds. They
assert a claim for interference with a prospective advantage because when
LINA caused the Iowa Legion to terminate its contract with IAI, two new
insurance plans IAI was to broker and administer for the Iowa Legion had
been about to come to fruition. Those allegations establish a "reasonable
LINA claims "what is pleaded falls far short" of stating a prima facie
case, but it
fails to say how. IAI meets the test spelled out recently in Belden
Corp. v. InterNorth, Inc., 90 Ill. App.3d 547, 551-52, 45 Ill.Dec. 765,
768-69, 413 N.E.2d 98, 101-02 (1st Dist. 1980). Belden found no
interference with a prospective advantage where plaintiff was deprived of
the advantage solely through defendant's pursuit of its own advantage. In
so doing the court said, id. at 553, 45 Ill.Dec. at 770, 413 N.E.2d at
. . . Belden cannot meet the requirements
for interference with prospective advantage unless
it makes a showing of unfair competition on the
part of InterNorth [citing authority]. Unfair
competition, which is not privileged, includes fraud,
intimidation, or disparagement.
Here IAI asserts the equivalent of such non-privileged unfair
Each of Counts VI and VII alleges:
Defendant approached officers, employees and/or agents
of Iowa and alleged that Plaintiff was delinquent with
premium remittances and contrary to law threatened and
intimidated Iowa by implying that coverage might not
be in force. Said threats were made for the purpose of
destroying the business relationship between Plaintiff
and the Iowa Department and such threats were known by
LINA to be false and contrary to law and as a result
Iowa withdrew sponsorship of this plan.
Each Count also incorporates by reference Count I's allegations of
Count VIII purports to charge another inducement of contract breach by
LINA, this time as to IAI's broker-administrator relationship with the
Illinois American Legion. It must however fail, for the Complaint
reflects the Illinois Legion did not terminate its relationship with
IAI, despite LINA's inducement. Accordingly LINA's motion to dismiss
Count VIII is granted.*fn5
Count IX is a contract action based on LINA's offer to pay IAI, as an
inducement to place cancer and vehicular insurance plans with LINA, a
"contingent commission" over and above that paid by the Iowa Legion. It
LINA first argues Count IX does not allege an "acceptance" of the
offer, so there is no contract on which to base a claim. But an offer for
a unilateral contract — like this one — may be "accepted" by
rendering performance. Placement of the insurance with LINA constituted
LINA also advances the Statute of Frauds as a bar to IAI's claim. At
least on the face of the Complaint it does not appear that the agreement
could not be performed within a year in all events — the relevant
legal test. At least at this stage, then, the Statute of Frauds defense
is not dispositive.
Counts X to XII
Counts X to XII properly state a cause of action against LINA for
defamation of both IAI and Harrison. Under Whitby v. Associates Discount
Corp., 59 III.App.2d 337, 207 N.E.2d 482 (3d Dist. 1965), an action for
libel (written defamation) will lie if the defendant's words:
(1) "imput[e] inability to perform or want of
integrity in the discharge of duties of office or
(2) "prejudic[e] a particular party in his
profession or trade."
Plaintiffs have satisfied the Whitby standard.
True enough, many of the LINA letters attached as Complaint Exhibits do
no more than inform the addressee that LINA "no longer recognizes [IAI]
as an authorized
agent" and that LINA will discontinue insurance then in force unless the
addressee chooses another "broker/agent/administrator." Such statements
are not themselves defamatory. Under the Illinois rule of innocent
construction, no criticism of IAI or Harrison's professional abilities
need be inferred from LINA's letter of notice.
But Exhibits D and E stand on different ground entirely. Those letters
state to the Iowa Legion's officials:
We regret to inform you that we have not received
certain premiums on policies issues to the Iowa
American Legion that were due as far back as
September, 1980. These premiums were collected by your
broker, Mr. Sheldon Harrison of G & H Insurance
Administrators, Inc. [another company that Harrison
headed], but have not been remitted to [LINA].
That statement (if false, of course) prima facie exposes LINA to a
defamation claim. It may fairly be read as charging Harrison and IAI with
at least a gross deviation from the fiduciary obligation they owed the
Iowa Legion.*fn6 Certainly such charges impute to Harrison and IAI a
"want of integrity in the discharge of duties of office or employment" in
the language of Whitby. For the same reason the LINA statements could
well "prejudice a . . . party in his profession or trade." LINA's motion
is therefore denied as to Counts X to XII as well.
LINA has moved to strike the Complaint's claims for punitive damages.
While this action may not ultimately turn out to present the aggravating
circumstances needed to award punitive damages, such a conclusion
— as a matter of law — would be improper. IAI's Complaint
portrays LINA as interfering with IAI's enforceable contracts and
advantageous relationships out of nothing more than pure ill-will (and
inferentially a desire to place control of the Iowa Legion's accounts in
the hands of a broker/agent/administrator favorable to LINA). IAI claims
its shift of insurance business to other underwriters was in the best
interests of its principals, the Iowa and Illinois Legions.
If that sketeh turns out at trial to be a true portrait, a jury could
legally award punitive damages against LINA. Thus its motion to strike
the claims for punitive damages is denied.
LINA's motion to dismiss is granted only as to Count VIII. Its motion
is denied as to Counts I through VII and IX through XII. LINA's motion to
strike punitive damage claims is also denied.*fn7 LINA is ordered to
answer the Complaint on or before May 21, 1982, and the case is set for
status hearing July 8, 1982 at 9:15 a.m.