I’ve handled a number of commercial lawsuits in which one business has accused another – usually a competitor – of “tortious interference.” The basic concept underlying such a claim is that Victim Company had an actual or potential business relationship with a third party (perhaps, but not necessarily, a customer) before Predator Company unfairly intervened to destroy the relationship or prevent its occurrence. Although a market economy like ours both permits and encourages businesses to compete for opportunities, a prudent business owner should have a basic understanding of the line that separates aggressive, lawful competition from conduct that amounts to tortious interference. I’ve encountered entrepreneurs who, unfortunately, didn’t obtain that understanding until after they had crossed the line and incurred liability.
Tortious interference claims are based on state law, and the states vary as to how they define those claims and what they call them. It suffices to say, though, that the courts generally recognize two types of tortious (or “wrongful”) interference: “interference with contract” and “interference with business relations” (a/k/a “interference with business expectancy” or “interference with economic relations”).
A claim of “interference with contract” can exist only where Predator Company has purposely caused the breach, or disrupted performance, of an existing contract between Victim Company and the third party. In order to win on this type of tortious interference claim, Victim Company would have to prove, at the very least, that (i) it had a binding contract with the third party, (ii) Predator Company knew of the contract’s existence, (iii) Predator Company intentionally and successfully convinced the third party to breach the contract or otherwise disrupted the third party’s ability to meet its obligations, and (iv) Victim Company suffered a resulting loss. Under the laws of some states, such a showing would be enough to create liability. In other states, however, Victim Company also would have to prove an important additional fact: “malice” on Predator Company’s part. Malice might, depending on which state’s law applies, be proven by demonstrating Predator Company’s improper motive (such as intent to injure Victim Company) and/or use of improper methods (e.g., through criminal conduct, threats, or making of defamatory comments about Victim Company).
In contrast to “interference with contract,” a claim of “interference with business relations” can be implicated even where no contract existed between Victim Company and the third party. In fact, such interference can occur where (i) Victim Company and the third party had merely expected to enter into a written contract or business relationship prior to Predator Company’s actions; or (ii) there was, prior to Predator Company’s actions, an existing “at will” relationship between Victim Company and the third party (such as where a customer purchases from Victim Company on an “as needed,” transaction-by-transaction basis), and those parties had reason to believe that the relationship would continue. Generally, Victim Company would have to prove Predator Company’s malice in order to prevail on this type of interference claim.
The tortious interference doctrine, like other trade-related laws, is intended not to prevent or constrain competition, but to protect it. If you’re a business owner, then you certainly should fight hard to win customers, clients, and other opportunities – but just be aware that underhanded efforts to pry them from your competitors could ultimately prove counterproductive. If unsure about a planned course of conduct, consult with a business attorney.