From the desk of Josh Hayward: In order for a business to recover damages for injury to its reputation, it must produce some evidence of quantifiable, economic harm, such as decreased income, diminished value of the business, or a reduction of the business’s goodwill. Merely providing testimony that the business’s reputation has been injured without evidence quantifying the amount of damages is insufficient for recovery.
Claims Pointer: A party claiming tortious interference with a business relationship must prove: (1) the existence of a valid contractual relationship of which the defendant has knowledge, (2) intentional interference with an improper motive or by improper means that causes breach or termination of the contractual relationship, and (3) resulting damage. Damages can include all losses proximately related to the interference.
Mut. of Enumclaw Ins. Co. v. Gregg Roofing, Inc., 315 P.3d 1143 (Wash. Ct. App. 2013)
Parkside Church (the “Church”) hired defendant Gregg Roofing to install a new roof on the church and to repair dry rot. After Gregg Roofing had removed the roof in preparation to install a new one, an unexpected rain storm damaged the building’s interior when water leaked through the temporary covering Gregg Roofing had installed. The Church filed a water damage claim with its insurer, plaintiff Mutual of Enumclaw (“MOE”), which assigned its employee Robert Lowrie as the adjuster for the claim.
Lowrie allegedly met with the Church’s pastor and persuaded him to terminate Gregg Roofing’s contract and instead to hire Charles Prescott Restoration, Inc. (“CPR”), owned by Donald Chill, to repair the water damage. The Church hired CPR, fired Gregg Roofing, and did not allow Gregg Roofing to complete the remaining $5,301 on its $16,212 roof replacement contract. In exchange for being given the job, Chill allegedly gave Lowrie financial gifts and “kickbacks.” MOE was subrogated to the Church’s rights and sued Gregg Roofing alleging that Gregg Roofing had breached its contract by causing the damage to the church. Gregg Roofing asserted various counterclaims, including a claim for tortious interference with a business relationship based on Lowrie convincing the Church to fire Gregg Roofing.
A party claiming tortious interference with a business relationship must prove: (1) the existence of a valid contractual relationship of which the defendant has knowledge, (2) intentional interference with an improper motive or by improper means that causes breach or termination of the contractual relationship, and (3) resulting damage. At trial, the jury concluded that Gregg Roofing did not breach its contract with the Church and found that MOE had tortiously interfered with the contract and awarded $1.5 million in “reputation” damages. MOE filed a motion for judgment as a matter of law as well as alternative motions for a new trial or reduction of the verdict. All motions were denied by the trial court. MOE appealed.
On appeal, MOE argued that Gregg Roofing failed to present any evidence to quantify the amount of injury to its reputation. The Court of Appeals agreed. The court noted that Gregg Roofing’s only testimony regarding damages came from the president of the company, Tiffany, and not from any experts. Tiffany testified that after the church incident, Gregg Roofing was not asked to bid on several other residential and commercial roofing projects on which the company normally would have been expected to bid. He specifically mentioned two churches and a four-building apartment complex. Tiffany also testified that another contractor had recommended Gregg Roofing for a job, but that the project owner declined because of the “Parkside Church fiasco.” Gregg Roofing did not provide any evidence regarding the profits it may have lost because it did not bid on these projects or any other evidence regarding financial losses relating to MOE’s conduct.
The Court found that Gregg Roofing’s evidence was insufficient to establish damage to its reputation. The Court stated that proof of economic damages is required to support a damages award for harm to a business’s reputation. The Court noted that the only damages a business can recover for injury to its reputation are economic. If a business has not suffered any financial loss from diminished reputation, it has not been damaged. By definition, economic harm to a business is quantifiable and measureable. Due to the fact that injury to a business’s reputation necessarily is quantifiable, the court held that in order to recover damages for that injury, a business must provide evidence of some measurable loss. Such loss includes decreased income, diminished value of the business, or a reduction of the business’s goodwill. Merely providing testimony that the business’s reputation has been injured without evidence quantifying the amount of damages is insufficient for recovery. A business cannot recover unquantified “general” damages for injury to reputation. Therefore, the trial court erred in awarding $1.5 million in damages.
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