This argument presents substantial problems. First, MBI's offers no support whatsoever for its assertion that an indivision should be analogized to a general partnership. Paloma's expert testified that under French law, an indivision does not constitute a legal person and is a sui generis form of ownership that is distinct from a corporation, partnership, association, or joint ownership. Bermann Aff. at PP 10-11. Thus, there is no basis to conclude that New York partnership law should govern Paloma's capacity to be sued. Similarly, there is no basis to find that an indivision is analagous to an estate under New York law.
Paloma argues that New York choice of law principles should be considered. This argument has some support in the case law. See, e.g., General Heat & Power Co. v. Diversified Mortgage Investors, 552 F.2d 556, 557 n.1 (3d Cir. 1977) (suggesting that Rule 17(b) encompasses the state's conflict of law rules); Jacobs v. Adams, 601 F.2d 176, 178-79 (5th Cir. 1979) (applying conflict of law rules to determine scope of power or right to bring suit); but see Tigert v. Lord, Bissell & Brook, 1989 U.S. Dist. LEXIS 4427 *3 (D.D.C. April 28, 1989) (choosing not to apply conflict of law principles under Rule 17(b)).
Under New York choice of law principles, "the law of the jurisdiction which, because of its relationship or contact with the occurrence or the parties, has the greatest concern with the specific issues raised in the litigation," controls. Roby, 796 F. Supp. at 107 (citing Istim Inc. v. Chemical Bank, 78 N.Y.2d 342, 575 N.Y.S.2d 796, 581 N.E.2d 1042 (1991)). Because an indivision is a creation of French law, all of the heirs are French citizens, and Paloma is sued solely because of her status created under French law, French law governs.
Accordingly, under French law, Paloma Picasso is not authorized to be sued as an heir. She is therefore not amenable to suit for the acts of the kind alleged in the Second Amended Complaint, and her Motion to Dismiss is granted as to all counts except Count Seven.
B. Tortious Interference with Contract
In order to state a claim for tortious interference with contract under New York law, a plaintiff must allege four elements: i) the existence of a valid contract between the plaintiff and a third party; ii) defendant's knowledge of the contract; iii) defendant's intentional inducement of the third party to breach the contract or otherwise render performance impossible; and iv) damages to plaintiff. Kronos, Inc. v. AVX Corp., 81 N.Y.2d 90, 94, 595 N.Y.S.2d 931, 612 N.E.2d 289 (1993) (citing Israel v. Wood Dolson Co., 1 N.Y.2d 116, 151 N.Y.S.2d 1, 134 N.E.2d 97 (1956)); Enercomp, Inc. v. McCorhill Publishing, Inc., 873 F.2d 536 (2d Cir. 1989). MBI's proposed Count Seven clearly alleges the existence of valid contracts between it, Mitsukoshi and INFAS, Paloma's knowledge of those contracts, and damages to MBI. Proposed Count Seven at PP 183-84, 192. However, because of the somewhat conflicting statements of element three which exist in the case law, it is less clear if proposed Count Seven sufficiently establishes the third element of the tort.
A number of New York courts, as well as federal courts in New York which have had occasion to interpret New York law, have stated that the tort of intentional interference with contractual relations requires the plaintiff to allege and prove that the defendant induced or otherwise caused a third party to breach a contract with the plaintiff. See, e.g., Benjamin Goldstein Productions, Ltd. v. Fish, 198 A.D.2d 137, 603 N.Y.S.2d 849, 851 (1st Dep't 1993) (tortious interference with contract claim fatally flawed and academic where plaintiffs failed to show breach of the underlying contract by third parties); NBT Bancorp v. Fleet/Norstar Financial Group, 159 A.D.2d 902, 553 N.Y.S.2d 864, 868 (3d Dep't) appeal dismissed, 76 N.Y.2d 886, 561 N.Y.S.2d 546, 562 N.E.2d 871 (1990) (to plead a claim for intentional interference with contractual relations, a pleader is required to allege a breach of the contract); Universal City Studios v. Nintendo Co., Ltd., 797 F.2d 70 (2d Cir), cert. denied, 479 U.S. 987, 93 L. Ed. 2d 581, 107 S. Ct. 578 (1986) (tortious interference with contract claim requires plaintiff to establish that defendant induced a breach of the contract); American Express v. Accu-Weather, Inc., 849 F. Supp. 233, 241 (S.D.N.Y. 1994) (same); see generally Restatement (Second) of Torts, § 766 (1979) (defining intentional interference with performance of contract as intentional and improper interference "with the performance of a contract between another and a third person by inducing or otherwise causing the third person not to perform the contract").
In the present case, MBI does not allege that Paloma induced either Mitsukoshi or INFAS to breach their respective contracts with MBI. Rather, MBI terminated the contracts with Mitsukoshi and INFAS after Paloma's statements to Mitsukoshi and INFAS made the performance of the contracts "more difficult and lessened each party's enjoyment of the contract." See Proposed Count Seven at PP 185-187, 189-190. Because MBI does not allege that Paloma induced Mitsukoshi or INFAS to breach their respective contracts with MBI, MBI has not stated a claim in Count Seven for tortious interference with contract under the cases which require a plaintiff to allege a breach of the underlying contract by the third party.
However, a number of other courts have held that a plaintiff does not have to allege a breach of the underlying contract in order to state a claim for tortious interference with contractual relations. See, e.g., New York Yankees v. Sportschannel Associates, 126 A.D.2d 470, 510 N.Y.S.2d 870, 872 (1st Dep't 1987) (in order to make out a claim for tortious interference with contract, a plaintiff must prove defendant interfered with the performance of the contract without justification); S & S Hotel Ventures Ltd. Partnership v. 777 S.H. Corp., 489 N.Y.S.2d 478, 480-81 (1st Dep't 1985) (although plaintiff did not assert a breach of the underlying contract by the third party, complaint stated a claim for tortious interference with contract); Maison Lazard v. Manfra, Tordella & Brooks, Inc., 585 F. Supp. 1286 (S.D.N.Y. 1984) (citing Goodall v. Columbia Ventures, Ltd., 374 F. Supp. 1324, 1332 (S.D.N.Y. 1974) for the proposition that the tort of interference with contractual relations "extends to cases in which performance of the contract is rendered more difficult or a party's enjoyment of the contract's benefits is lessened by the wrongdoer's actions"); Ecolab, Inc. v. Paolo, 753 F. Supp. 1100 (E.D.N.Y. 1991) (elements of tortious interference with contract claim include defendant's unjustified and intentional interference with the contract).
In its most recent pronouncement on the subject, the New York Court of Appeals stated that the "tort of inducement of breach of contract, now more broadly known as interference with contractual relations," requires a plaintiff to prove that the defendant intentionally induced the third party to breach or otherwise render performance impossible. Kronos, Inc., 81 N.Y.2d at 94. While the issue of breach was not central to its holding, Kronos suggests that, while an allegation of breach is not an absolute prerequisite for the tort, in most cases "improper intentional interference [will] generally [be] evidenced by a tortfeasor inducing...a third party not to perform his contractual obligations to plaintiff." Enercomp, Inc., 873 F.2d at 541 (citing Guard Life Corp. v. S. Parker Hardware Mfg. Corp., 50 N.Y.2d 183, 189, 428 N.Y.S.2d 628, 406 N.E.2d 445 (1980)). If the third party has not breached the contract, however, a plaintiff must allege that defendant's actions induced the third party to somehow render performance impossible.
Under this standard, MBI's proposed Count Seven does not state a claim. MBI asserts that Paloma's statements made performance more difficult and lessened each party's enjoyment of the contracts; however, lessening each party's enjoyment is not an allegation that Mitsukoshi or INFAS rendered performance impossible or even that the contracts became commercially impracticable. Moreover, the fact that Mitsukoshi and INFAS "lost faith in MBI and sought continuous reassurance" and "Mitsukoshi was forced to fly two million dollars of its prototypes to New York for a product review" is not burdensome enough to constitute improper interference. Neither company felt compelled to terminate the contracts, inform MBI that termination was being considered, or prevent any future performance under the contracts. Nor does MBI claim that Paloma's statements made it impossible for it to perform; indeed, MBI simply claims that the Mitsukoshi and INFAS contracts became "very expensive" to maintain and does not allege that its performance was substantially prevented. In sum, accepting all of MBI's allegations as true and construing all reasonable inferences in its favor, these allegations do not rise to the level of interference necessary to constitute tortious interference with contract. Accordingly, Paloma's Motion to Dismiss Count Seven is granted.
For the reasons stated above, Paloma Picasso's Motion to Dismiss is granted.
Shira A Scheindlin
Dated: New York, New York
June 2, 1995