Thursday, February 13, 2014

Gregg Lapointe v. SIGMA TAU Pharmaceuticals, Inc.

Filed: September 11, 2013 

Opinion by Michael D. Mason 

Holdings:  (1) A parent corporation is allowed to interfere with the subsidiary's contracts without liability under the "unity of interest" doctrine.  This privilege is not absolute, however.  It does not exist if the parent acts contrary to the interests of the subsidiary or interferes with a contract with a third party by use of wrongful means.  The burden of establishing a privilege lies with the complaining party. 

(2) If a privilege is found, it would extend to a shareholder with a controlling interest in the parent corporation. 

Facts:  Plaintiffs, former employees of corporate defendant's wholly owned subsidiary, alleged that the corporate defendant and its largest shareholder (also an individually named defendant) tortuously interfered with plaintiffs' long-benefit plan causing a refusal to pay benefits to which plaintiffs were entitled.  

Defendants filed motion to dismiss arguing that even assuming wrongful interference, no liability exists when a parent interferes in a contract between its wholly owned subsidiary and a third party because there is a "unity of interest" between the parent and its subsidiary.  The largest shareholder of the parent also claimed benefit to this doctrine.

Analysis:  Although Maryland courts have discussed the issue of whether the unity of interest doctrine applies to tortious interference claims involving a parent corporation and its wholly owned subsidiary, they have not adopted it.  In Copperweld Corp. v. Independence Tube Corp., the U.S. Supreme Court held that a parent corporation could not be prosecuted for an antitrust violation involving its subsidiary because a parent and its wholly owned subsidiary have a complete unity of interest. 

However, as the principle relates to a parent corporation’s liability for tortious interference with the contractual agreement of its subsidiaries, most courts that have adopted the doctrine have done so with limitations.  In Waste Conversion Sys., Inc. v. Greenstone Indus., Inc., 33 S.W.3d 779, 781 (Tenn. 2000), the Supreme Court of Tennessee held that a parent could lose its privilege if (1) acting contrary to its wholly-owned subsidiary’s economic interests the parent can be considered a third party to its subsidiary's contractual relationship and can be held for tortuously interfering with that relationship; and (2) it employs wrongful means even if the parent does not act contrary to the subsidiary's best interest.  Wrongful means is defined to include misrepresentation of facts, fraud, threats, intimidation, as well as a number of other acts, including any other wrongful act recognized by statute or common law.  The burden of proof lies with the plaintiff.

The full opinion is available in PDF.