Facts
- A motel owner/manager contracted with Chul Woo Lee and Mrs. Lee for the Lees to operate the motel’s restaurant under a profit-sharing arrangement.
- The contract included a termination provision tied to the restaurant operators’ creation of liability for the motel owner/manager.
- After the Lees fired a waitress, the motel owner/manager treated the termination as creating potential liability and ended the relationship.
- The motel owner/manager locked the Lees out without prior notice, took over the restaurant, and retained control of property located inside.
- The Lees alleged wrongful termination/lockout, conversion of equipment and personal property, and intentional interference with their relationships with suppliers and customers.
- The jury returned a verdict for the Lees on breach of contract, conversion, and interference with business relationships, awarding substantial compensatory and punitive damages (approximately $979,400 total).
Issues
- Whether damages for wrongful termination were legally limited to losses within an asserted 30-day contractual notice period.
- Whether the trial court abused its discretion by admitting damages expert testimony from an individual who had become a sitting judge after being retained.
- Whether a party’s own intentional breach of its contract can support a tort claim for intentional/malicious interference with the other party’s business relationships with third persons.
- Whether the evidence supported conversion liability and, if so, whether it supported punitive damages for conversion.
Decision
- The court affirmed liability for breach of contract and rejected a categorical limitation of damages to a 30-day period where the lockout constituted a material breach.
- The court held admission of the damages expert testimony was not an abuse of discretion where the expert had been retained before taking judicial office and the jury was not told of his judgeship.
- The court reversed the judgment on intentional/malicious interference with business relationships to the extent it rested on the defendant’s own breach of its contract, vacating related tort damages (including punitive damages tied to that theory).
- The court affirmed conversion liability to the extent supported by proof of the Lees’ superior possessory rights and the defendant’s wrongful dominion, but limited or disallowed punitive damages for conversion absent the required showing of actual malice (with remand as needed to conform the judgment).
Legal Principles
- Intentional interference with economic or business relations is generally directed at improper interference by a third party with the plaintiff’s existing or prospective relationships; it is not established merely by a contracting party’s intentional breach.
- Courts should not permit contract disputes to be repackaged as interference torts in a manner that expands remedies beyond contract law, particularly to obtain punitive damages.
- A material breach such as an abrupt lockout can support expectation damages beyond a notice period when the defendant’s conduct is inconsistent with continued performance and ordinary contract remedies apply subject to proof and non-speculation.
- Conversion requires proof of the plaintiff’s ownership or superior possessory right and the defendant’s wrongful exercise of dominion inconsistent with that right.
- Punitive damages for conversion require actual malice (or conduct sufficiently wanton or reckless to permit an inference of malice); proof of conversion alone is insufficient.
Conclusion
The court upheld recovery for breach of contract and for proven conversion-related losses, but it rejected tort liability for intentional interference where the alleged wrongdoing was the defendant’s own contract breach, and it curtailed punitive damages under Maryland’s heightened malice standards.