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Houston Harbaugh Blog

District Court Declines to Dismiss Tortious Interference Claim Asserted Against CEO in Personal Capacity

In Kearney v. JPC Equestrian, NO. 3:11-1419, 2013 U.S. Dist. LEXIS 142409 (M.D. Pa. Oct. 2, 2013), the U.S. District Court for the Middle District of Pennsylvania considered whether the plaintiff had properly stated a claim for tortious interference with contractual relations against the chief executive officer of a company with whom the plaintiff had entered into a contract. The plaintiff alleged that the CEO, acting in his individual capacity, had diverted sales away from him, thereby interfering with the sales agreement that he had with the company to sell and receive commissions on the company's products. Under these facts, the court allowed the tortious interference claim to be asserted against the CEO personally, despite the general rule that directors and officers are insulated from personal liability for action taken in their corporate capacities.

Although not stated expressly, it can be inferred from the court's analysis that the determinative factor was that the plaintiff alleged that the CEO was acting outside the scope of his corporate authority and for his personal benefit. In this regard, the decision is generally consistent with long-standing Pennsylvania law, which holds that a director or officer is not immune from liability if he or she personally participates in a tort. See, e.g., Loeffler v. McShane, 539 A.2d 876, 878 (Pa. Super. 1988). At least one Pennsylvania federal court has criticized the application of the so-called "participation" theory to the tort of tortious interference where the contract at issue is a contract between the claimant and the corporation-i.e., because a corporation cannot tortiously interfere with its own contract, it necessarily follows that a tortious interference claim involving such a contract must arise out of a tortious act committed by a director or officer acting in his or her personal capacity. Stanley v. Exxon Corp., 824 F. Supp. 52, 54 (E.D. Pa. 1993). This distinction is arguably more academic than real, but it is still interesting to note, especially since the court did not elaborate on these issues as part of its analysis.

The full text of the decision can be seen here: Kearney v. JPC Equestrian, Inc., No. 1419 (M.D. Pa. Oct. 2, 2013).pdf

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