## Facts

- Alyeska Pipeline Service Company contracted with Radio Corporation of America (RCA) on a cost-reimbursable basis to build, operate, and maintain a pipeline communications system, with RCA responsible for necessary transportation.
- RCA subcontracted with Aurora Air Service, Inc. for air-transport services; the subcontract allowed RCA to terminate on notice.
- Alyeska later elected to provide air transportation itself and exercised its contractual right to change the scope of services RCA was to provide, reducing or removing transportation from RCA’s responsibilities.
- RCA then terminated its air-transport subcontract with Aurora pursuant to the termination clause.
- Aurora sued Alyeska and two Alyeska employees for intentional interference with contractual relations, alleging Alyeska induced RCA’s termination in bad faith and primarily to injure Aurora, with asserted safety and economic reasons serving as pretext.
- The superior court denied Alyeska’s summary-judgment motion and, after trial, a jury found Alyeska liable and awarded Aurora $362,901 in damages (including punitive damages); the court denied JNOV and remittitur.
- Alyeska appealed, arguing an absolute privilege based on its contractual right, insufficient evidence, instructional and evidentiary error, and improper punitive damages.

## Issues

1. Whether a party’s unilateral contractual right to change a contractor’s work scope creates an absolute privilege to interfere with a subcontractor’s contract, regardless of motive, or whether exercise of that right is limited by good faith.
2. Whether the evidence supported the verdict that Alyeska intentionally and improperly induced termination of the Aurora–RCA contract without justification.
3. Whether alleged instructional, evidentiary, and punitive-damages errors required reversal or reduction of the judgment.

## Decision

- The Alaska Supreme Court affirmed the judgment for Aurora.
- The court rejected Alyeska’s claim of absolute privilege; contractual leverage does not immunize interference undertaken in bad faith or primarily to harm a third party.
- The court held the motive/justification dispute—whether Alyeska acted to protect legitimate economic or safety interests or used those reasons as a pretext to injure Aurora—was properly submitted to the jury.
- The evidence was sufficient to support the jury’s finding of intentional, improper interference and the resulting damages.
- The court found no reversible error in the challenged instructions, evidentiary rulings, submission of punitive damages, or denial of remittitur.

## Legal Principles

- Intentional interference with contractual relations is established when a defendant, without justification, intentionally causes a third person to terminate or not perform a contract with the plaintiff.
- A claimed privilege to interfere based on contractual rights or the actor’s economic interest is not absolute; it is qualified by a requirement of good faith.
- Exercising contractual power predominantly to injure a third party, or using asserted economic/safety concerns as pretext, defeats any privilege and permits tort liability.
- Questions of motive, justification, and impropriety in interference claims commonly present fact issues for the jury when the evidence conflicts.

## Conclusion

The court held that Alyeska’s contractual right to alter RCA’s scope of work did not give it absolute immunity from liability for interference with Aurora’s subcontract; because the record allowed a finding that Alyeska acted in bad faith and without justification, the jury’s verdict and damages award were affirmed.


Alyeska Pipeline Serv. Co. v. Aurora Air Serv., Inc., 604 P.2d 1090 (Alaska 1979)