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Allegation of conspiracy not enough to support civil conspiracy claim

November 26, 2014

A parts supplier failed to convince the Indiana Court of Appeals that a civil conspiracy claim against several co-defendants named in a breach of contract dispute can stand without showing every alleged conspirator committed an underlying unlawful act.

Crystal Valley, a supplier to the recreational vehicle, manufactured housing and boating industry, filed a complaint against former employee and shareholder Jonathan Anderson for breach of contract, breach of fiduciary duty and breach of loyalty. The company asserted that Anderson diverted one of its suppliers to another competitor and sold a competitor’s products while still employed at Crystal Valley.

The company also included in the complaint a count for civil conspiracy against Anderson and the co-defendants of his father, his business associate and other suppliers.

At a hearing on motions, the defendants filed a motion for dismissal on the grounds that Crystal Valley failed to state a claim upon which relief can be granted. The co-defendants asserted they were not parties to Anderson’s noncompete agreement with Crystal Valley and they did not have any loyalty or other fiduciary duty to the company.

The Elkhart Superior Court agreed and granted the defendants’ motion and entered a final judgment in favor of all the defendants except Anderson.

Crystal Valley appealed. Pointing to Winkler v. V.G. Reed & Sons, Inc., 638 N.E.2d 1228 (Ind. 1994), the company contended its conspiracy claim is not dependent on pleading an underlying tort for each alleged conspirator.

The Court of Appeals noted Crystal Valley did not include any allegation that the co-defendants committed unlawful acts and instead relied “heavily on language tucked in a Winkler footnote.”

Consequently, the Court of Appeals affirmed the trial court’s decision in Crystal Valley Sales, Inc., Charles Kline and Nancy Kline v. Jonathan Anderson, National Sales Company Inc., Rodger Anderson, Camco Manufacturing and Norm Geible, 20A04-1402-PL-83.
 
“However, the complaint must allege some unlawful act underlying the defendants’ concerted action,” Judge Terry Crone wrote for the court. “In other words, it is not enough that the alleged conspirators acted in concert and that the result amounted to a breach of a contractual or fiduciary duty by one of them; rather, Winkler makes it clear that there must be some intentional underlying act of wrongdoing by each of the co-conspirators. This is not to say that each alleged conspirator must participate at an equal level, for rarely would that be the case in any conspiracy. Nevertheless, at a minimum, the plaintiff must put each defendant on notice of the unlawful act that he/she/it is alleged to have agreed to commit.”
 

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