Question : For decades, Carvel sold its ice cream
For decades, Carvel sold its ice cream only through franchised stores. However, a decline in revenues caused the company to begin selling its product in supermarkets. That effort expanded quickly, but many of the franchised stores (franchisees) went out of business. Franchisees filed suit, claiming tortious interference with a prospective advantage. In particular, the plaintiffs argued that Carvel undersold them in supermarkets, and issued coupons only redeemable there. The case reached New York’s highest court. Issue: Had Carvel committed tortious interference with a prospective advantage? Holding: Judgment for Carvel. In the words of the court: The franchisees' tort claim is that Carvel unlawfully interfered with the relationships between the franchisees and their customers. The franchisees do not claim that the customers had binding contracts that Carvel induced them to breach; they allege only that, by implementing its supermarket program, Carvel induced the customers not to buy Carvel products from the franchisees. The juries have found that Carvel did so induce customers, and the question for us is whether that inducement was tortious interference under New York law. Inducing breach of a binding agreement and interfering with a nonbinding "economic relation" can both be torts, but that the elements of the two torts are not the same. Where there has been no breach of an existing contract, but only interference with prospective contract rights, however, plaintiff must show more culpable conduct on the part of the defendant. The implication is that, as a general rule, the defendant's conduct must amount to a crime or an independent tort. The franchisees’ claim that Carvel used wrongful economic pressure fails for two reasons. First, it is ill-founded because the economic pressure that must be shown is not, as the franchisees assume, pressure on the franchisees, but on the franchisees' customers. All Carvel did to the franchisees' customers was to make Carvel goods available in supermarkets at attractive prices. Second, Carvel’s activities do not amount to the sort of extreme and unfair "economic pressure" that might be "wrongful." The crux of the franchisees' complaint is that Carvel distributed its products through competitive channels, to an extent and in a way that was inconsistent with the franchisor-franchisee relationship. The relationship between franchisors and franchisees is a complex one. It does not preclude all competition; and the extent to which competition is allowed should be determined by the contracts between the parties, not by courts or juries seeking after the fact to devise a code of conduct. Required: a. On what theory did the franchisees sue Carvel? b. What must a plaintiff prove to win on this theory? c. What does “economic advantage” mean? d. How does this tort differ from tortious interference with contract? e. What are the elements of tortious interference with contract? f. In the Carvel case, what was the basis for the plaintiffs’ claim of economic advantage? g. What did Carvel do to upset the plaintiffs? h. Did the court agree that this conduct amounted to tortious interference with prospective advantage?