## Facts

- Hartford issued variable annuity contracts (“Director”/“Director II”) allowing owners to allocate and “reallocate” contract value among several mutual-fund subaccounts.
- Windsor, an investment adviser led by Paul Prusky, managed certain Hartford annuity contracts for clients using frequent “market timing” reallocations, often acting through powers of attorney and standardized transfer authorizations.
- Hartford concluded that high-frequency trading by market timers increased transaction costs and other adverse effects on the underlying funds and other investors.
- Hartford adopted a Third Party Transfer Services Agreement (TPTSA) requiring third-party agents effecting transfers for multiple owners over a threshold to (i) obtain powers of attorney and (ii) accept aggregate daily transfer caps and possible additional limits after notice.
- Windsor and investor Walter G. Arader (a contract owner whose account Windsor managed) refused to sign the TPTSA-related documents.
- Windsor sued Hartford for tortious interference, alleging Hartford intentionally made Windsor’s performance of its advisory contracts more expensive and burdensome.
- Arader sued for breach of contract, alleging the restrictions violated his contractual right to reallocate “at any time.”
- The district court entered summary judgment for Windsor on tortious interference and for Arader on breach liability, but ultimately entered final judgment for Hartford on Arader’s claim after finding no recoverable damages due to mitigation principles; Hartford appealed and Windsor/Arader cross-appealed.

## Issues

1. Whether Pennsylvania law recognizes a tortious-interference claim under Restatement (Second) of Torts § 766A for conduct that makes the plaintiff’s own contractual performance more burdensome, and, if so, whether Hartford’s conduct was “improper.”
2. Whether Hartford’s transfer restrictions breached Arader’s annuity contract granting a right to reallocate “at any time,” and whether Arader proved compensable damages in light of mitigation and causation.

## Decision

- The court reversed summary judgment for Windsor on tortious interference and directed judgment for Hartford on that claim.
- The court held Pennsylvania had not clearly adopted Restatement § 766A, and, even assuming § 766A could apply, Hartford’s conduct was not “improper” as a matter of law.
- The court affirmed the district court’s final judgment for Hartford on Arader’s contract claim because Arader failed to establish recoverable damages after considering mitigation and causation.

## Legal Principles

- In diversity cases, a federal court should not extend state tort law beyond clear state-court authority; Pennsylvania recognized Restatement § 766 but had not clearly adopted § 766A.
- Tortious interference requires “improper” interference; conduct undertaken to protect legitimate business interests, without independently wrongful means (e.g., fraud, misrepresentation, or coercion), is not improper even if it burdens another’s contract performance.
- Contract remedies require proof of causation and compensable damages; a plaintiff must take reasonable steps to mitigate losses, and failure to mitigate can reduce or eliminate recovery.

## Conclusion

The Third Circuit held Hartford’s fund-protection restrictions on third-party transfers could not support Windsor’s tortious-interference theory because Pennsylvania had not clearly adopted § 766A and, in any event, Hartford acted with legitimate justification and without wrongful means. It also affirmed judgment for Hartford on the investor’s contract claim because any potential breach did not result in recoverable damages once mitigation and causation were applied.


Windsor Sec., Inc. v. Hartford Life Ins. Co., 986 F.2d 655 (3d Cir. 1993)