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Breach Of Settlement Agreement - Hearsay - Tortious Interference With Prospective Employment - Vicarious Liability

Cobbs, Allen & Hall, Inc. v. EPIC Holdings, Inc., [Ms. 1190687, Mar. 26, 2021], ___ So. 3d ___ (Ala. 2021). The Court (Mendheim, J.; Parker, C.J., and Bolin, Wise, Sellers, Stewart, and Mitchell, JJ., concur; Bryan, J., concurs in part and dissents in part) affirms in part and reverses in part the Jefferson Circuit Court’s summary judgment dismissing Cobbs, Allen & Hall (CAH)’s claims for breach of contract and tortious interference with a prospective employment relationship. CAH sued its former employee McInnis and his current employer EPIC Holdings, Inc. (EPIC) asserting breach of a settlement agreement and tortious interference with CAH’s employment offer to Michael Mercer. Ms. * 20.

The Court affirms the summary judgment on the breach of contract claim and concludes the settlement agreement merely required EPIC to instruct its employees not to disparage CAH. The Court declines CAH’s invitation to imply a duty not to disparage and explains “the implied covenant of good faith and fair dealing cannot be used to alter the plain meaning of a contract.” Ms. *64.

The Court also affirms the trial court’s striking on grounds of hearsay an affidavit of CAH principal Bruce Denson. In pertinent part the Denson affidavit averred

“7. On July 31, 2018, Mr. Mercer informed me that he was not coming to work for CAH and was instead remaining at Lockton. In response to my inquiry as to his reasons for such decision, Mr. Mercer told me that he had spoken to Mr. McInnis and that Mr. McInnis had told him that CAH was a terrible place to work, that it was controlled by the Densons and the Rices, and that if anyone disagreed with the Densons or Rices, ... they would take their stock and not pay them for it.”

Ms. *25. The Court rejects CAH’s argument that the statements were not hearsay because they were not offered for the truth of the matter asserted and explains

Rule 805, Ala. R. Evid., provides that “[h]earsay included within hearsay is not excluded under the hearsay rule if each part of the combined statements conforms with an exception to the hearsay rule provided in these rules.” ... Thus, even though McInnis’s alleged statements to Mercer might qualify as non hearsay because they are not offered for the truth of the matter asserted but, rather, to prove that McInnis made those statements to Mercer, CAH still must satisfy hearsay concerns with respect to Mercer’s relating those statements to Denson. In that regard, it matters whether Mercer was truthfully conveying to Denson what McInnis said, and therefore that part of the statement is being offered for the truth of the matter asserted.

Ms. **26-27.

The Court also rejects CAH’s argument that the statements are admissible under “Rule 803(3), Ala. R. Evid., because they ‘explain [Mercer’s] reasons, i.e. , his state of mind, for not taking the [CAH] job.’ CAH’s brief, p. 39.” Ms. **29-30. The Court explains

…[T]he statement still does not reflect Mercer’s intent to do something. Instead, the statement allegedly reflects the reasons behind Mercer’s decision to do something – specifically, to decline CAH’s job offer. The hearsay exception in Rule 803(3) does not apply to such statements. Rather, it concerns statements indicating a present feeling or physical condition or “statements of mind expressed before the commission of the act as to which the state of mind is relevant.” Advisory Committee’s Notes to Rule 803, Paragraph (3) (emphasis added). This exception “does not apply to the declarant’s after-the-fact statements made about his past state of mind .... It similarly does not apply to the ‘declarant’s statements as to why he held the particular state of mind.’” United States v. Cummings, 431 F. App’x 878, 882 (11th Cir. 2011)(quoting United States v. Duran, 596 F.3d 1283, 1297 (11th Cir. 2010)).

Ms. *33 (emphasis in original).

The Court also affirms the circuit court’s judgment that EPIC was not vicariously or directly liable because “… the communication on both sides was impelled by personal motives that had nothing to do with McInnis’s duties at EPIC.” Ms. *59. The Court explains “EPIC could not have stopped McInnis’s conduct because it had no knowledge of the communications at the time they were taking place. Accordingly, there is no evidence that EPIC ratified McInnis’s conduct.” Ms. *62.

On the defense of justification, the circuit court applied Restatement (Second) of Torts §772 which provides:

“One who intentionally causes a third person not to perform a contract or not to enter into a prospective contractual relation with another does not interfere improperly with the other’s contractual relation, by giving the third person ‘(a) truthful information, or (b) honest advice within the scope of a request for the advice.’”

Ms. *39. Despite expressly approving the circuit court’s application of §772, Ms. *43, the Court reverses the summary judgment in favor of McInnis because “when the evidence is viewed in the light most favorable to CAH, it becomes apparent that McInnis’s statements to Mercer potentially were misleading.” Ms. **54-55.

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