## Facts

- Waste Conversion Systems, Inc. (WCS) contracted with Greenstone Industries–Atlanta, Inc. (GSI-A), a wholly owned subsidiary of Greenstone Industries, Inc. (GSI), for the sale of waste paper and similar fiber materials.
- The contract required GSI-A to purchase a minimum monthly quantity at a fixed price over a long-term period.
- After market prices for fiber fell, WCS alleged GSI-A refused to accept contracted fiber so it could buy cheaper fiber on the open market.
- WCS alleged GSI (the parent) induced GSI-A to breach the contract and sued GSI for tortious interference with contract.
- A federal district court certified questions to the Tennessee Supreme Court concerning parent-corporation liability for inducing a wholly owned subsidiary’s breach.

## Issues

1. Whether a parent corporation that wholly owns a subsidiary is privileged or immune from tortious-interference liability for inducing the subsidiary to breach a contract with a third party.
2. If a qualified privilege exists, under what circumstances it is lost (including acting contrary to the subsidiary’s economic interests), and who bears the burden of proving loss of privilege.
3. What constitutes “wrongful means” sufficient to defeat the parent’s privilege.

## Decision

- The court held a parent corporation that owns 100% of a subsidiary is generally privileged to interfere with the subsidiary’s contracts and is ordinarily immune from tortious-interference liability for inducing breach.
- The privilege is qualified and may be lost if the parent (1) acts contrary to the subsidiary’s economic interests or (2) uses wrongful means to induce the breach.
- Once complete ownership is shown, the burden shifts to the plaintiff to prove the parent lost the privilege under one of the exceptions.
- The court answered only the certified legal questions and did not decide whether the parent’s conduct in this dispute actually fell within an exception.

## Legal Principles

- A wholly owning parent and subsidiary are treated as a single economic unit for purposes of evaluating tortious interference, supporting a presumption that the parent’s involvement in the subsidiary’s contracts is justified.
- A parent’s interference with a wholly owned subsidiary’s contract is presumptively privileged because the parent has a legitimate interest in directing and protecting the subsidiary’s business.
- The privilege is defeated only by proof that the parent acted against the subsidiary’s economic interests or employed wrongful means.
- “Wrongful means” requires independently wrongful conduct (e.g., fraud, misrepresentation, or other tortious or unlawful acts), not merely profit-seeking or hard bargaining.
- After 100% ownership is established, the plaintiff bears the burden to prove loss of the privilege.

## Conclusion

The court recognized a qualified privilege shielding a wholly owning parent from tortious-interference liability for inducing a subsidiary’s breach, placing on the plaintiff the burden to show the parent acted against the subsidiary’s economic interests or used independently wrongful means.


Waste Conversion Sys., Inc. v. Greenstone Indus., Inc., 33 S.W.3d 779 (Tenn. 2000)