Lawrence L. Mathis, an Individual, Doing Business as Lawrence L. Mathis Consulting v. Ching Liu, an Individual, Doing Business as Pacific Cornetta, Inc. Alex Liu, an Individual, Doing Business as Pacific Cornetta Inc. Pacific Cornetta Inc., an Oregon Corporation Pacific Smart Enterprises, Ltd., a Foreign Corporation

Citations: 276 F.3d 1027; 18 I.E.R. Cas. (BNA) 326; 2002 U.S. App. LEXIS 709Docket: 01-1994

Court: Court of Appeals for the Eighth Circuit; January 16, 2002; Federal Appellate Court

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Lawrence L. Mathis, operating as Lawrence L. Mathis Consulting, appealed a decision from the United States District Court for the Western District of Arkansas after his contract with Pacific Cornetta was terminated. Mathis sued Pacific Cornetta and its officers for breach of contract and tortious interference. The jury awarded him compensatory damages but the trial court granted Pacific Cornetta's motion for judgment as a matter of law on the tortious interference claim and did not allow punitive damages to be considered. 

Mathis had a contract with Pacific Cornetta to solicit orders for a commission, which was terminable at will. He later contracted with John Evans to act as his sub-agent, which required six months' written notice for termination. After Pacific Cornetta criticized Mathis to Evans and encouraged him to break his contract, Evans terminated his agreement with Mathis and subsequently entered a contract with Pacific Cornetta. Mathis filed suit after these events. 

Under Arkansas law, tortious interference requires that the interference be deemed "improper." The court evaluates this based on factors from the Restatement (Second) of Torts, including the conduct and motive of the interfering party, the interests at stake, and the relationship between the involved parties. The appellate court affirmed the trial court's judgment in favor of Pacific Cornetta.

Mr. Mathis established a viable claim regarding tortious interference based on the nature of his contract with Mr. Evans, which required six months' notice for termination, distinguishing it from a purely at-will agreement. This difference rendered Pacific Cornetta's actions in hiring Mr. Evans potentially improper, as inducing a breach of contract without substantial justification is deemed improper under Arkansas law. For damages, a claimant must provide clear evidence quantifying losses, especially in cases involving anticipated profits. Mr. Mathis sought damages based on lost profits from Mr. Evans's sales of products to Kmart. However, the trial court found that the profits from Ingenious Design products would not have exceeded the commission Mr. Mathis owed to Mr. Evans, leading to no measurable loss. Additionally, the trial court ruled that any potential losses from Pacific Cornetta's sales to Kmart were already compensated through the jury's decision on Mr. Mathis's breach of contract claim. Mr. Mathis contended that the jury could have reasonably allocated the sales commissions from Pacific Cornetta products between the breach of contract and tort claims, suggesting that there were unpaid commissions for sales made prior to and after the termination of his contract.

Mr. Mathis's claim to commissions from sales of Pacific Cornetta products after the termination of his contract was rejected, as he had no entitlement to these commissions once the contract ended. The jury was not allowed to consider these commissions, as they were not linked to Mr. Evans's failure to perform the contract. Even if Mr. Evans had remained a sub-agent, Mr. Mathis would not have been entitled to the commissions. The losses incurred by Mr. Mathis were due to Pacific Cornetta's lawful termination of the contract, not due to any tortious interference by them. Although Mr. Mathis might have had a breach of contract claim against Mr. Evans, that matter is not relevant here. His reliance on the case of Benny M. Estes and Assoc. v. Time Ins. Co. is misplaced, as that case involved an ongoing contractual relationship at the time of the sales, which Mr. Mathis did not have. Arkansas law stipulates that actual damages must be established before punitive damages can be awarded, and since the trial court correctly set aside the jury's verdict for actual damages on the tortious interference claim, there was no basis for punitive damages. Consequently, the trial court's judgment is affirmed in all respects.