## Facts

- A financially troubled Ford dealership in Winston-Salem was reorganized and incorporated as Cloverdale Ford, Inc., with Ford recommending changes including new management.
- Jack D. Smith was hired as president and general manager under a written employment agreement dated May 18, 1971, which Cloverdale later adopted after incorporation.
- The employment agreement stated no definite duration of employment.
- Under Smith’s management, Cloverdale became profitable, and Smith participated in the Ford Dealer Alliance, a dealer group formed to protect dealer interests in dealings with Ford.
- Smith alleged Ford opposed his Alliance activity and told Cloverdale it would terminate the dealership franchise unless Cloverdale discharged him; Cloverdale fired Smith.
- Smith also alleged Cloverdale insiders Thomas Keesee, Sr., and James K. Dobbs (officers/shareholders) had agreed to give him an option to purchase their Cloverdale stock at book value, and that they pushed for his termination to avoid loss under that arrangement.
- Smith sued Ford, Cloverdale, Keesee, and Dobbs for breach of contract and tort claims including interference with contract and conspiracy.
- The trial court dismissed all claims under Rule 12(b)(6) for failure to state a claim; the Supreme Court of North Carolina reviewed the sufficiency of the complaint on certiorari.

## Issues

1. Whether termination of Smith’s employment stated a breach-of-contract claim where the written employment agreement fixed no definite term.
2. Whether Smith stated a claim that Ford tortiously induced Cloverdale to terminate an at-will employment relationship.
3. Whether Cloverdale’s officers/shareholders could be liable for tortious interference or conspiracy arising from the termination decision and related allegations.

## Decision

- The Supreme Court of North Carolina affirmed dismissal of the complaint as to all defendants.
- Because the employment agreement stated no definite term and no statute protected Smith from discharge, Cloverdale could terminate the employment at will, with or without cause; the discharge did not breach the employment contract.
- Smith failed to plead facts showing Ford’s alleged inducement was without justification, given Ford’s legitimate business interest connected to the dealership franchise relationship.
- Smith failed to state interference or conspiracy claims against Keesee and Dobbs because, as corporate insiders, they were not “outsiders” to Cloverdale’s contractual relations and the complaint did not plead actionable improper interference distinct from corporate decision-making.

## Legal Principles

- When an employment contract does not fix a definite term, it is terminable at the will of either party, with or without cause, absent statutory protection from discharge.
- A corporation may adopt a pre-incorporation contract by corporate action (express or implied) and thereby become liable for its performance.
- For interference analysis, an “outsider” is a nonparty to the contract who has no legitimate business interest in the contract’s subject matter; corporate fiduciaries and others with a legitimate business stake are generally non-outsiders.
- Even an at-will employment relationship can support an interference claim, but the plaintiff must plead facts showing the defendant acted without justification (and not merely to protect a legitimate business interest) or used independently wrongful means.

## Conclusion

The court held that an indefinite-term employment agreement created an at-will relationship that Cloverdale could end without breaching the contract, and it upheld dismissal of interference and conspiracy claims because the alleged actors had legitimate business interests or insider status and the complaint did not plead unjustified, independently wrongful interference.


Smith v. Ford Motor Co., 289 N.C. 71, 221 S.E.2d 282 (N.C. 1976)