18 N.Y.2d 982 (1966)

A corporate officer or director is not personally liable for the tortious acts of the corporation unless they are shown to have acted outside the scope of their corporate duties or with personal malice, and a cause of action for interference requires demonstrating a valid contract.

Summary

Rothschild sued World-Wide Automobiles and its officer, Dretzin, alleging Dretzin interfered with Rothschild obtaining a Volkswagen dealership franchise. Rothschild claimed Dretzin conspired with other dealers to prevent Rothschild from competing with them, violating the Donnelly Act. The court affirmed the dismissal of the complaint, holding that Rothschild failed to demonstrate a valid contract that Dretzin interfered with. Furthermore, Rothschild did not show sufficient facts to impute personal liability to Dretzin for the corporations’ actions or to support a claim of monopolistic practices. The evidence only showed Dretzin attempted to prevent competition in a territory where he had an interest.

Facts

Rothschild sought a Volkswagen dealership franchise and was initially approved by World-Wide Automobiles, a wholesale distributor, contingent upon securing a suitable location and final approval by Volkswagen of America. After selecting a site in Freeport, near Merrick, Rothschild informed Dretzin, a stockholder and director in World-Wide and Queensboro Motors, Inc. Dretzin allegedly threatened to block the dealership because it would compete with his interests and induced other dealers to pressure World-Wide.

Procedural History

The Supreme Court, New York County, denied Dretzin’s motion to dismiss the complaint and for summary judgment. The Appellate Division, First Department, unanimously reversed, granting the motion. The Court of Appeals affirmed the Appellate Division’s decision.

Issue(s)

1. Whether Rothschild established a valid contract that could form the basis of a cause of action against Dretzin for interference.
2. Whether Rothschild presented sufficient facts to impute personal liability to Dretzin for the tortious acts of the corporations he was an officer and director of.
3. Whether Rothschild presented sufficient facts to support a cause of action based on purported restraint of trade under the Donnelly Act.

Holding

1. No, because Rothschild failed to demonstrate a valid contract.
2. No, because Rothschild did not show facts that would impute personal liability to Dretzin for acts chargeable to the corporations.
3. No, because Rothschild’s proof did not sufficiently support a claim of monopolistic practices to warrant a trial on that issue.

Court’s Reasoning

The court reasoned that Rothschild failed to provide evidence of a valid contract with which Dretzin interfered. The court emphasized that to hold a corporate officer personally liable for a corporation’s torts, the plaintiff must show that the officer acted outside the scope of their corporate duties or with personal malice. Here, Dretzin’s actions appeared to be aimed at protecting his existing business interests from competition, rather than acting solely out of malice. The court found that Dretzin’s attempt to prevent the extension of a franchise into a competitive territory did not constitute a sufficient showing of monopolistic practices to warrant a trial under the Donnelly Act. The dissent argued that the complaint adequately stated a cause of action based on conspiracy to restrain trade and that the affidavits and exhibits raised a triable issue of fact. The dissent emphasized the distinction between lawful