What Is Tortious Interference?

You’ve worked hard to build your business. You’ve cultivated valuable relationships and secured contracts that keep things running. But what happens when an outside party intentionally meddles in those contracts or relationships, causing them to sour or fall apart?

When a third party’s wrongful conduct interferes with your contractual or business relationships, causing you economic loss, you may have a legal claim for tortious interference. As a business owner, executive, or professional, it’s crucial to understand tortious interference – what it is, how to establish a case, and what remedies are available.

In this article, we’ll provide a comprehensive overview of tortious interference claims. We’ll define key concepts, break down the elements you need to prove, and share real-world examples. By the end, you’ll have a clear sense of whether you have a viable case and what steps to take next.

What is Tortious Interference?

Tortious interference occurs when a third party intentionally and improperly disrupts a contract or business relationship between other parties, causing economic harm. To prove tortious interference, the plaintiff must show: (1) a valid contract or economic relationship, (2) the defendant’s knowledge of it, (3) intentional and improper interference, and (4) resulting damages.

What Are The Elements Of Tortious Interference?

To dive deeper into the key elements of a tortious interference claim:

1. Valid contract or economic relationship: There must be an enforceable contract or, in some cases, a business relationship with a reasonable expectation of economic benefit. For example, an unsigned agreement that the parties intended to be binding could qualify, as could a profitable long-term business relationship not governed by a contract.
2. Knowledge of the contract or relationship: The defendant must have been aware of the contract or business relationship. If they had no way of knowing the agreement or relationship existed, there can be no intentional interference.
3. Intentional and improper interference: The defendant’s interference must have been both intentional and improper. Intentional means the interference was willful, not accidental. Improper means the interfering conduct was unethical, illegal, or otherwise wrongful – merely competing for business is not tortious interference.
4. Resulting damage: The plaintiff must have suffered an economic loss as a result of the interference. Without actual damages, there is no viable claim. Note that the interference does not necessarily have to cause a breach of contract – inducing someone to simply alter or delay performance could be enough if it results in harm.

Disclaimer: The specific elements of a tortious interference claim may vary by jurisdiction, but the general principles outlined here are commonly recognized in many legal systems. Always consult with a legal professional familiar with the laws in your jurisdiction for precise guidance.

Let’s look at an example. Imagine you have a contract to supply car parts to a manufacturer. A competing supplier, aware of your contract, threatens to file false complaints of product defects against the manufacturer unless they stop doing business with you and switch to the competing supplier.

If the manufacturer then breaches your contract out of fear of the fake complaints, causing you to lose the expected profits from the deal, you would likely have a strong tortious interference claim against your competitor. Their threat was an intentional and improper disruption of your contractual relationship that caused you economic harm.

Tortious Interference With Contract Vs. With Business Relations

It’s important to distinguish between tortious interference with an existing contract and tortious interference with prospective business relations.

In a tortious interference with contract claim, there must be a valid and enforceable contract between the plaintiff and a third party. The defendant’s improper interference induces the third party to breach the contract. If there is no binding contractual relationship, the plaintiff cannot bring a tortious interference with contract claim.

However, the plaintiff may still have a claim for tortious interference with business relations if the defendant’s wrongful actions disrupted a likely future economic benefit. This type of claim does not require a formalized contract, only a reasonable probability that an economically advantageous business relationship would have occurred absent the interference.

For example, if a cosmetic surgeon had cultivated a strong referral relationship with a dermatology practice over many years, but a competing surgeon falsely told the dermatologists the original surgeon had botched procedures and could not be trusted, interfering with the profitable referral relationship, the original surgeon could potentially sue for tortious interference with prospective business relations even without a written referral contract in place.

The key difference is that tortious interference with contract protects the plaintiff’s contractual rights, while tortious interference with business relations protects the plaintiff’s reasonable expectation of a future business relationship or economic advantage.

What Constitutes “Improper” Interference?

Not all interference with a contract or business relationship is considered tortious. The key question is whether the interference was “improper.” Courts look at the nature of the defendant’s conduct and their motive to make this determination.

Certain types of conduct are almost always deemed improper, such as:

• Violence or threats of violence
• Fraud or misrepresentation
• Defamation or disparagement
• Bribery
• Abuse of process or frivolous lawsuits
• Violation of business ethics or customs
• Illegal conduct

In contrast, actions that constitute legitimate business competition, like offering better terms or prices, are not improper. A defendant who interferes while acting to protect their own contractual or financial stake in a business deal is also generally not liable unless their conduct involves wrongful means.

Motive is another important factor. If the defendant’s primary purpose was to injure the plaintiff’s business interests, rather than to advance their own interests, courts are more likely to find the interference improper.

For example, if a supplier offered a customer better prices to win their business away from a competitor, knowing it would cause the customer to cancel an existing supply contract, this would likely be considered lawful competitive conduct. However, if the supplier lied to the customer that the competitor used unsafe manufacturing processes in order to scare them into terminating the contract, this fraudulent misrepresentation would make the interference improper.

Examples Of Tortious Interference

To illustrate the wide range of situations that can lead to tortious interference claims, consider these examples:

• A company’s former employee starts a competing business and falsely tells the company’s customers that the company is facing bankruptcy and will be unable to fulfill orders, inducing them to cancel contracts and switch to the new competitor.
• A consultant working with a client threatens to publicly accuse the client of fraudulent accounting practices unless the client stops doing business with the consultant’s rival firm and gives them the contract instead.
• A manufacturer enters an exclusive distribution agreement with a supplier. A competing manufacturer calls the supplier and threatens to file a false report with a regulatory agency alleging the supplier’s products are defective unless they breach the exclusivity agreement and share distribution.
• After a contractor is awarded a lucrative construction project, a rival contractor files a baseless lawsuit disputing the bid process, delaying the project indefinitely. The rival knows the suit is meritless but wants to pressure the client into voiding the original contract and giving them the job instead.

In each scenario, the defendant used wrongful tactics – lies, threats, abuse of process – to intentionally disrupt an existing or prospective business relationship between the plaintiff and a third party, likely resulting in economic losses. These are classic examples of tortious interference.

What Remedies Are Available For Tortious Interference?

If a plaintiff prevails on a tortious interference claim, they can recover damages for the economic harm caused by the interference. The types of damages available include:

1. Compensatory damages: These are intended to make the plaintiff “whole” by compensating them for actual losses suffered, such as lost profits from a breached contract, loss of future business opportunities, or costs incurred as a result of the interference (e.g., finding a replacement supplier at a higher cost). The plaintiff must prove the amount of damages with reasonable certainty.
2. Consequential damages: The plaintiff may also recover for foreseeable indirect losses caused by the interference, like harm to their reputation or goodwill. For example, if false disparagement of the plaintiff’s business capabilities caused them to lose out on other contracts beyond the directly affected relationship, those lost profits could potentially be recoverable.
3. Punitive damages: If the defendant’s conduct was particularly egregious, willful, or malicious, the court may award additional damages to punish the behavior and deter future misconduct. Punitive damages are typically a multiple of the compensatory damages award.
4. Injunctive relief: In some cases, the plaintiff may seek a court order preventing the defendant from continuing to interfere with their business relationships. This is most common when the interference is ongoing or threatens imminent harm that cannot be adequately remedied by monetary damages alone. For example, a court could order the defendant to retract defamatory statements made to the plaintiff’s customers.

The specific remedies available will depend on the facts of the case and the governing state law. An experienced business litigator can assess the full extent of a plaintiff’s damages and devise a strategy to maximize recovery in a tortious interference lawsuit.

How Do I Prove Tortious Interference?

If you suspect your business has been harmed by another party’s tortious interference, proving your case requires gathering strong evidence of each essential element. Here are key steps to build your claim:

1. Document the business relationship: Collect all records showing the existence and details of the contract or business relationship that was interfered with, such as signed agreements, purchase orders, invoices, or correspondence revealing the relationship’s scope and value.
2. Prove the defendant’s awareness: Look for evidence the defendant knew about your contract or business relationship, like emails, text messages, or witness testimony that they were informed of the relationship. If the defendant is a competitor in your industry, you may be able to argue they must have been aware given their market knowledge.
3. Identify improper conduct: Pinpoint the specific misconduct that constituted interference, such as records of false statements made by the defendant to your business partners, evidence of bribes or threats, or baseless legal actions filed to disrupt your relationships. The more specific details you have of the improper behavior, the stronger your case.
4. Show causation and damages: Demonstrate that the defendant’s interference directly caused the third party to breach their contract with you or alter/terminate the business relationship. For example, if a client emailed you that they were ending a contract early because of the defendant’s conduct, this would be compelling proof. You must also have evidence of the economic losses you suffered as a result, such as lost profits or increased costs. Financial records, accountant analyses, and expert testimony can help prove your damages.
5. Disprove justification: Be prepared to counter any potential defenses the defendant may raise, such as arguing their actions were justified to protect their own business interests or that their conduct was mere competitive behavior. Gather evidence to show the defendant’s true motive was to harm you and that they used improper means beyond normal competition.
6. Consult an attorney: Tortious interference claims can be complex and fact-intensive. Consulting with a business litigation attorney experienced in these cases can ensure you identify all available evidence, calculate your full damages, and devise an effective strategy to get the best possible outcome.

By methodically collecting evidence to prove each element of your claim and disprove likely defenses, you put yourself in the strongest position to prevail in a tortious interference lawsuit or negotiate a favorable settlement. Acting promptly is critical, as valuable evidence can disappear, and legal deadlines to file suit may apply.

Protect Your Business From Tortious Interference

In today’s digital age, tortious interference often occurs through online means. A disgruntled ex-employee, unethical competitor, or malicious third party may try to interfere with your contracts or business relationships by posting false negative reviews, disparaging your business on social media, or using other internet channels to spread lies or misinformation about your company.

At Minc Law, we focus on the intersection of business, reputation, and the Internet. Our experienced attorneys have helped numerous clients deal with the fallout of tortious online conduct, including interference with their business relationships and contracts. We can review the details of your situation to determine if you have a viable tortious interference claim and recommend the best path to preserve your business interests and seek legal relief.

If you believe your contracts or economically beneficial relationships have been damaged by tortious interference online, contact us to discuss your options. We are here to help you protect your business and fight back against wrongful digital attacks.

The online abuse ends today. Call us at (216) 373-7706 or schedule a meeting online by filling out our online contact form.