When a business or person tries to economically injure a competitor by meddling with a contract or business relationship of the competitor, a claim for tortious interference may arise. However, not all forms of interference are actionable in New York. These are complicated cases that present a host of strategic and practical considerations. Having an experienced commercial litigation attorney by your side is critical. Here is what you need to know about tortious interference.
How do you prove tortious interference?
The elements of a cause of action for tortious interference with an existing contract are:
- A valid contract with a third party
- The defendant’s actual knowledge of the contract
- Intentional interference through the use of wrongful means
- A resulting breach of the contract, and
- Damages.
If there is no contract but a loss of a business opportunity, the claim may instead be for tortious interference with a prospective contract or economic advantage. In those cases, the plaintiff must show with some degree of certainty that the contract or business opportunity would have been obtained but for the interference. The plaintiff also has to prove that the defendant used improper means or acted solely for the purpose of injuring the plaintiff.
“Wrongful means” involves conduct that is tantamount to a crime or independent tort and may include some degree of economic pressure exerted on the third party to stop the prospective business relationships with the competitor. Examples of conduct that may give right to a tortious interference claim are:
- Soliciting customers away from a business in knowing disregard for their contracts
- Obstructing a transaction, such as a corporate acquisition or a real estate deal
- Hiring an employee or partner away from the business and inducing the ex-employee or ex-partner to breach a non-compete or confidentiality agreement or to violate some other restrictive covenant
- Engaging in unethical business practices, blackmail, or force with the intent to cause a breach of a contract
It is quite common for a plaintiff to lack direct knowledge of the interference, as the defendant’s wrongful act is almost always directed at a third party resulting in the third party’s breach of its contract with, or breaking off relations with, the plaintiff. Consequently, many tortious interference lawsuits begin by relying on inferences and circumstantial evidence. However, as the litigation progress, the plaintiff will likely need to obtain evidence from non-parties, such as a potential customer who may not want to be involved in the lawsuit or may lose interest in doing business with the plaintiff. Discovery may also be needed from an alienated customer who simply does not wish to cooperate with the plaintiff. Thus, prosecuting a tortious interference case requires not only careful legal analysis but also business decisions.
How do you defend a tortious interference claim?
Courts in New York recognize that competition must be permitted in order for the market economy to function. Thus, a competitor’s self-interest may be a defense to a tortious interference claim unless there is a showing of malice or illegality. To illustrate, if the interfering party had some financial or legal stake in the outcome of the impending deal or an existing contract held by a competitor, the interference may not be actionable. However, if the defendant was motivated for other reasons, such as to punish the competitor by making false claims about the competitor, then the self-interest defense will not be available.
Another common defense strategy is to disprove causation. A tortious interference with a prospective contract or economic opportunity requires non-speculative proof of damages resulting from the improper interference. If the plaintiff is unable to show a high degree of probability that a contract or business relationship would have been finalized but for the defendant’s wrongful interference, then the claim will likely fail.
Choose Levy Goldenberg LLP
Levy Goldenberg LLP, New York’s leading commercial litigation firm, has an impressive track record prosecuting and defending tortious interference claims. If you suspect that your business was harmed due to the improper interference of a competitor, or if you have been accused of wrongfully interfering with a contract or business relationship of another, contact us today to discuss your case.