## Facts

- Thomas M. Hannigan and Tru-Han Corporation distributed metal outdoor storage products made by Fabricated Products, Inc. (president: John Columbini).
- Hannigan conceived a metal “lawn locker” and entered an exclusive arrangement with Fabricated: Fabricated would manufacture lawn lockers exclusively for Hannigan, and Hannigan would purchase all lawn lockers Fabricated produced.
- Fabricated separately sold other outdoor storage buildings directly to Sears, which accounted for about 60% of Fabricated’s business; Columbini indicated Fabricated could not survive without Sears.
- Sears sought a single supplier for its full line of outdoor buildings and lawn lockers; Sears’s buyer, John Mitchell, knew of Hannigan’s exclusive contract but pressed for Fabricated to sell lawn lockers directly to Sears.
- Mitchell conveyed that if Fabricated could not supply the whole line, Sears would look elsewhere, and suggested Fabricated would make more money selling lawn lockers directly to Sears.
- After Sears’s pressure, Fabricated and Hannigan changed their arrangement: Fabricated sold lawn lockers directly to Sears, while Hannigan received a 10% commission per unit instead of his prior distributor margin.
- Hannigan and Tru-Han sued Sears for intentional interference with their contractual relationship with Fabricated, alleging Sears induced Fabricated to depart from the exclusive arrangement and coerced Hannigan’s assent.
- The district court directed a verdict for Sears on antitrust counts; the interference counts went to the jury, which awarded $30,000 compensatory and $90,000 exemplary damages. Sears appealed.

## Issues

1. Whether the evidence was sufficient for a jury to find that Sears knowingly, intentionally, and wrongfully interfered with plaintiffs’ contract with Fabricated.
2. Whether the absence of a formal “breach” (because the contract was “modified” with Hannigan’s consent) required judgment for Sears.
3. Whether the district court erred in denying Sears’s motions for directed verdict, judgment notwithstanding the verdict, or a new trial on the interference counts.

## Decision

- The Seventh Circuit affirmed the judgment for Hannigan and Tru-Han.
- Applying the directed-verdict/JNOV standard, the court held that reasonable jurors could differ and could find for plaintiffs when evidence and inferences were viewed favorably to them.
- The court concluded the jury could find Sears knew of the exclusivity, applied coercive economic pressure leveraging its dominant purchasing power, and caused an adverse change to plaintiffs’ contractual rights.
- The court rejected Sears’s argument that a “modification” and Hannigan’s apparent agreement necessarily defeated the interference claim, because the jury could view the modification as coerced.
- The compensatory and exemplary damages awards were left undisturbed.

## Legal Principles

- Under Illinois law, a defendant may be liable for intentional interference with contractual relations where it knowingly and intentionally induces a contracting party to breach or otherwise impair contractual rights without adequate justification, causing damages.
- A contract’s “modification” does not bar liability if the trier of fact could find the change resulted from improper coercion rather than voluntary, independent choice.
- In reviewing denial of a directed verdict or judgment n.o.v., the court must view the evidence and reasonable inferences in the light most favorable to the verdict winner; the motion is properly denied if reasonable jurors could reach different conclusions.
- Economic self-interest may support a privilege to compete or bargain, but the privilege is fact-dependent and may be rejected where the conduct is found wrongful in light of knowledge of the contract and the nature of pressure used.
- Exemplary damages may be sustained where the evidence permits a finding of willful or egregious interference beyond ordinary commercial negotiation.

## Conclusion

The Seventh Circuit held that the jury could reasonably find Sears wrongfully interfered with Hannigan’s exclusive arrangement by using its economic leverage, with knowledge of the exclusivity, to induce a contract change that reduced plaintiffs’ contractual benefits, and it therefore affirmed the liability and damages awards.


Hannigan v. Sears, Roebuck & Co., 410 F.2d 285 (7th Cir. 1969)