Business Torts and Amending Complaints: KENNEY V. HANGER PROSTHETICS & ORTHOTICS, INC. (COA 9/21/2007)


DATE RENDERED: 09/21/2007

This  Kentucky Court of Appeals decision provides a veritable grocery list of business related causes of action and their elements.

In the case, John M. Kenney had been an employee of Hanger Prosthetics, but ventured out on his own. Kenney and his company, Kenney Orthopedics, LLC, filed a petitioner alleging that Hanger employee Michael Adams made false representations about him, such as that he embezzled from Hanger and was barred from competing with Hanger per a non-compete contract provision, which harmed his business venture. Only Kenney’s claim of breach of contract passed summary judgment while the defamation and tortious interference with business claims died there.

Since the litigation souffle made of the claims of tortious interference and defamation claims fell, Kenney attempted to make a stew instead by amending his complaint to incorporate a grocery list of other causes of action. The trial court refused to amend the petition. The breach of contract claim resulted in a hung jury and the trial court granted another summary judgment in Kenney’s favor regarding his claim for a 4% commssion from Hanger. Kenney appealed the trial court’s refusal to amend its complaint to incorporate the following list of claims accompanied by the definitions given by the Court of Appeals:

A. Interference with Prospective Contractual Relations
[t]he tort of interference with a prospective advantage is plagued with the absence of a uniformly recognized terminology. It has been referred to as the tort of interference with a business relationship, inducing refusal to deal, interference with a prospective economic advantage, interference with advantageous relations, interference with reasonable economic expectancies, or interference with prospective business expectancies. . . . The American Law Institute has named the tort "Intentional Interference with Prospective Contractual Relation."
. . . .
B. Defamation Per Quod
The difference between defamation per se and defamation per quod is that, in the former, damages are presumed and, in the latter, the plaintiff must prove special damages.. . . .

C. Unfair Competition/Trade Practices
[U]nfair competition consists of either (1) injuring the plaintiff by taking his business or impairing his good will, or (2) unfairly profiting by the use of the plaintiff’s name, or a similar one, in exploiting his good will. Underlying the whole theory is the matter of actual or intended deception of the public for business reasons. . . . .

D. Slander of Title, Trade Libel/Disparagement, Injurious Falsehood
Corporations and other businesses can and do recover for libel or slander when they have been defamed by charges such as crime or fraud. But defamatory charges commonly made against individuals–adultery, for example–have little relevance to corporations and many of the imputations about corporations are harmful without being defamatory. When the publication asserts that the corporate product is defective, inadequate, or harmful without asserting personal defamation, the traditional view regards the claim as essentially different from the claim for defamation. The same is true if the publication merely says that the plaintiff has gone out of business. This different claim goes under the general name of injurious falsehood. When the publication attacks a product, it is also called trade libel or commercial disparagement. When the publication attacks title to property rather than quality of a product, the claim is likely to be called slander of title. . . . .

1. Slander of Title
[T]hat the defendant has knowingly and maliciously communicated, orally or in writing, a false statement which has the effect of disparaging the plaintiff’s title to property; he must also plead and prove that he has incurred special damage as a result.
. . . .
2. Trade Libel/Disparagement
Trade libel involves disparaging and false assertions about the quality of one’s property rather than title to it.
. . . .
3. Injurious Falsehood
One who publishes a false statement harmful to the interests of another is subject to liability for pecuniary loss resulting to the other if (a) he intends for publication of the statement to result in harm to interests of the other having a pecuniary value, or either recognizes or should recognize that it is likely to do so, and (b) he knows that the statement is false or acts in reckless disregard of its truth or falsity. Restatement (Second) of Torts § 623A (1977). . . . .

E. Illegal Restraint of Trade and Commerce
A restraint of trade may be adjudged unreasonable if it is per se unreasonable or violates the rule of reason. . . . Examples of per se unreasonable conduct include price-fixing arrangements, tying arrangements, agreements among competitors to divide markets or to allocate customers, group boycotts, and agreements to limit production. . . . Kenney has clearly not alleged any of these practices or any comparable practices. As for a restraint which violates the rule of reason, "showing merely injury to oneself as a competitor is insufficient." . . . . Thus, the trial court did not err by failing to permit Kenney to amend his claim in this regard.
(internal citations omitted)

The Court of Appeals found this cause of action stew rather bland and rejected each one of these attempts to amend the original complaint to survive summary judgment. The trial courts decision to disallow the complaint to be amended would not be disturbed unless it was an abuse of discretion. The Court of Appeals noted that the interference claim and the defamation per quod claims were so similar to the original claims of tortious interference and plain old defamation that they would not have survived summary judgment either. The other causes of action simply were not sufficiently supported by the facts to be viable.

Gregory A. Napier

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