§ 6.2.8 THIRD PARTY MISCONDUCT AS ELEMENT.

• Jurisdiction: Arizona

§ 6.2.8 Third Party Misconduct as Element. The Restatement recognizes liability for potential interference only when the wrongdoer interferes with a contract "between another and a third person . . ."⁵⁷ In the employment context this raises two unique questions. First, may an employer itself be held liable for interference with the contract of its own employee? Second, may an agent of the employer acting within the course and scope of his or her agency, be held liable for interference with an employment contract with the employer and another employee? The answer under the first question appears settled under Arizona law, while the answer to the second question is less clear.

The Arizona Supreme Court established in Wagenseller v. Scottsdale Memorial Hospital that the existence of a "third party" is a necessary element to the tort.⁵⁸ In Wagenseller, the Arizona Supreme Court specifically concluded that the plaintiff could not pursue an intentional interference with a contract claim against her prior employer. No subsequent Arizona authority has called this conclusion into question.

The potential for a supervisor to be held individually liable for tortious interference presents a murkier picture under Arizona law. In Petroni v. Board of Regents, ⁵⁹ the Arizona Court of Appeals affirmed a trial court's directed verdict against a plaintiff professor on his tortious interference with employment claim brought against the school board, department head and others. The court of appeals based its ruling on the principle long held in Arizona "that agents and employees of a corporation cannot conspire with their corporate principal or employer when acting in their official capacities on behalf of the corporation and not as individuals for their individual advantage." It found that there was no evidence of any "individual advantage," or that any actions were taken outside the scope of official duties. Several years later in Payne v. Pennzoil Corp., the Arizona Court of Appeals similarly held in 1983 that a supervisor or individual employee could not be held liable for intentional interference with the contract when that supervisor or employee acts within the scope of his or her employment.⁶⁰ The court reasoned that because the employees were acting for the company "they were the company," and therefore, could not be held to be interfering with their own contract.⁶¹ Citing both Petroni and Payne, however, the Wagenseller court addressed the third party element of the tort in the context of supervisory liability, and rejected a per se rule that would prohibit liability for intentional interference by a supervisor or employee acting within the scope of his or her employment.⁶² It outlined factual circumstances that may subject a supervisor to liability even if the supervisor acts within the course and scope of his or her employment. Facts such as acting to further a private advantage rather than further the interests of the employer, acting out of malice and ill will without interest of the corporation in mind, or publishing with actual malice false and defamatory statements, likely render the supervisor's interference "improper," thereby creating exceptions to the per se rule.⁶³ In Wagenseller, the Arizona Supreme Court reversed the trial court's award of summary judgment in favor of the plaintiff's supervisor, finding that the evidence presented a genuine dispute as to whether the supervisor had intentionally and improperly interfered with the employment relationship between the plaintiff and the employer entity.⁶⁴

The Arizona Court of Appeals addressed the third party element of the tort in 1988 in Barrow v. Arizona Board of Regents.⁶⁵ The plaintiff in Barrow claimed among other things that individual members of the Board of Regents independently interfered with Barrow's employment contract. The court of appeals rejected the claim, concluding that under Wagenseller and Payne, the individual members of the Board of Regents could not interfere with a contract between the Board of Regents and Barrow because the individual members of the Board of Regents were acting as the Board of Regents. Because there was no third party, there could be no wrongful interference with the contract.⁶⁶

However, only weeks after publication of the Barrow decision, the Ninth Circuit reached a contrary result in Bernstein v. Aetna Life Insurance.⁶⁷ The Ninth Circuit concluded that under Wagenseller a supervisor may be held liable for intentional interference with a contract, even when the supervisor acts within the course and scope of his or her employment.⁶⁸ The Bernstein decision does not make a single mention of the Barrow case.⁶⁹

Subsequent to the Barrow/Bernstein dichotomy, other courts applying Arizona law have followed the Payne and Barrow line of analysis. In Kelley v. City of Mesa,⁷⁰ a judge from the federal district court sitting in Arizona cited Payne and held that individual supervisors and decision-makers at the City of Mesa could not be held liable for intentional interference as long as they acted within the course and scope of their employment. Likewise, the District Court for the District of Arizona reached the same conclusion in...