Friday, January 20, 2012

Dirty Business of Undercutting Competitors Relations with Contractors Leads to Large Verdict for Interference with a Contract

Pennsylvania Interference with a contract and unfair business practices


A good friend of mine with a burgeoning business has recently encountered the cut-throat side of fighting his way into an established market with a better product.  Unfair business practices and interference with existing contracts is the norm apparently.  In preparation for helping him with business violations he competitors may commit against his company, I have been researching Pennsylvania cases involving interference with contractual relations.

One interesting case from several years ago culminated in the matter of Empire Trucking v. Reading Anthracite Coal Company.  In 1993, plaintiff Empire Trucking Co., a Pottsville-based coal supplier, began hauling coal for Reading Anthracite Coal Co. and its affiliates, Barakat Associates and Waste Management & Processors Inc. Soon afterward, Empire began subcontracting with other trucking companies to handle the workload.

Gary Lorenz Sr., Empire's principal, alleged that Reading Anthracite and its affiliates had, through an oral contract in 2000, agreed to pay Empire fuel surcharges based on the price of gas at any given time, but that Reading and its affiliates failed to pay anything to Empire during July and August 2008, and by extension paid nothing to Empire's subcontractors.

Lorenz and Empire sued Reading Anthracite Coal Co. and the aforementioned associates, Waste Management & Processors Inc. and Barakat Associates, asserting claims of breach of contract and tortious interference with a contract. (Lorenz was no longer a named plaintiff by the time of trial.)

Plaintiff's counsel asserted that the total amount of unpaid bills was approximately $330,000. Lorenz testified that he had repeatedly called Reading Anthracite representatives to inquire about the unpaid bills and was told each time that payments were en route and to keep working pursuant to the oral agreement. Counsel claimed that as Empire and its subcontractors kept performing duties under the agreement, Reading Anthracite and its affiliates began telling Empire's subcontractors that Empire had already been paid, which created a rift between Empire and its subcontractors. Then, counsel charged, Reading and its affiliates began directly hiring Empire's former subcontractors, "acing" out of their share of profits earned by insuring and billing for some of the subcontractors under its business license. As a result, two of those subcontractors, Elaine Stine Trucking Inc., and Moyer Transport, sued Empire.

Plaintiff's counsel argued that once the defendants hired Empire's subcontractors, the company refused to pay any fuel surcharges. According to counsel, Jeffrey Gliem, Reading Anthracite's director of operations, admitted at trial, during his cross-examination, that the defendants' plan was to "divide and conquer" Empire's subcontractors.

The defendants denied the allegations. Defense counsel argued that Empire did not calculate the fuel surcharges according to the terms of the firms' oral agreement, resulting in surcharge hikes that far exceeded the increases in fuel prices at the pumps. As a result, Empire overcharged Reading Anthracite by about $486,000, Waste Management by about $115,000 and Barakat by about $122,000. Once these overcharges were discovered, the defendants refused to pay Empire for submitted July, August and September invoices and demanded a refund of the overcharged amounts, which Empire refused. Subsequently, the defendants went directly to some of Empire's subcontractors and sought their services, with the belief that the subcontractors were free to contract with any other parties at any time they wished. The defense maintained that Empire had already ceased working with the subcontractors at that point, so no contracts existed with which to interfere.

The plaintiff's accounting expert testified that Empire Trucking sustained $271,000 in damages as a result of the defendants' alleged tortious interference with its invoices and its subcontractors' employment. Plaintiff's counsel further claimed that Empire sustained $313,000 in breach-of-contract damages.

Empire received directed verdicts in the amount of $70,000 against Barakat Associates and Waste Management & Processors Inc. The plaintiff further sought to recover punitive damages against the defendants.  After a four day trial and two hours of deliberations, the jury returned a verdict in favor of Empire in the following amount:

   $1,500,000 Personal Injury: Punitive Damages
   $299,495 Personal Injury: breach of contract damages
   $271,000 Personal Injury: tortious interference with contract damages
   $70,000 Personal Injury: Share this post :
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