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Keywords

contractsettlementtortplaintiffdefendantdamagesattorneyliabilityindemnitytrialwill
contractsettlementplaintiffdefendantliabilitytrialwilloverruled

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Herbits v. Constitution Indem. Co. of Philadelphia, 279 Mass. 539, 181 N.E. 723

Facts

The plaintiffs represented a client, Mrs. Edwards, who was injured in a motor vehicle accident. They had a contract entitling them to a fee based on any settlement or trial outcome. The defendant, insured by the motor vehicle liability policy, settled directly with Mrs. Edwards for $1,250 without the plaintiffs' knowledge, leading to the plaintiffs' claim that they were deprived of their contractual benefits. The plaintiffs argued that the defendant's actions were malicious and intentional, causing them to lose their expected fees.

The evidence tended to establish the following facts: In October, 1928, the plaintiffs' client, Mrs. Edwards, was seriously and permanently injured by the negligent operation of a motor vehicle by one Curto, who was insured by the defendant under a motor vehicle liability policy. She successively employed, or authorized the employment of, the four plaintiffs to prosecute her claim, under a contract whereby she agreed to pay them a fee which should be equivalent to one third of any sum secured by settlement or trial of her case and, in the event that the suit was unsuccessful, to pay the disbursemenets and such fee as she should be able to pay.

Issue

Did the defendant tortiously interfere with the plaintiffs' contractual rights by inducing their client to settle her claim directly, thereby depriving the plaintiffs of their fees?

The plaintiffs assert the right to recover under the doctrine that a defendant, who has intentionally interfered with the right of the plaintiff to have the benefit of a contract by causing the plaintiffs' co-contractor to break it, commits a legal wrong if the defendant acted with ill will or without legal justification.

Rule

A defendant may be liable for tortious interference if they intentionally cause a party to breach a contract, but this requires showing actual ill will or lack of legal justification. An attorney has no lien for fees until after a final judgment, and clients may settle their cases without the attorney's consent.

The mere intentional causing of the loss of benefits or profits under a contract is not in itself actionable. To constitute a legal wrong there must be, in addition, either actual ill will or purpose to harm (the finding of which is not here warranted) or the lack of legal justification.

Analysis

The court analyzed the evidence and determined that the plaintiffs could not recover because the client had the right to settle her case independently. The court noted that the plaintiffs' contract did not restrict the client's ability to settle, and thus the defendant's actions did not constitute a legal wrong. The court emphasized that the plaintiffs failed to demonstrate that the defendant acted with ill will or without justification.

While the evidence does not warrant the finding that the defendant actually knew that by the terms of their contract of employment the plaintiffs' fee was to be based upon the amount, if any, paid in settlement or after trial of the case, it knew that there was an employment and that services had been rendered by the plaintiffs.

Conclusion

The court upheld the ruling for the defendant, concluding that the plaintiffs could not recover damages as the client's settlement was within her rights and did not breach her contract with the plaintiffs.

Exceptions overruled.

Who won?

Constitution Indemnity Company of Philadelphia prevailed because the court found that the plaintiffs' client had the right to settle her claim without their consent, and the defendant's actions did not constitute tortious interference.

The settlement made by the plaintiffs' client was within her contract rights. She committed no breach of her contract with the plaintiffs by making the settlement.

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