Cause of Action for Interference with Contractual and Prospective Business Relationships

TORTIOUS INTERFERENCE WITH EXISTING BUSINESS RELATIONS AND CONTRACTUAL RELATIONSHIPS

Tortious interference with a contract is a claim that comes up often in the realm of unfair competition lawsuits. Since it is on the tip of so many of our clients’ brains, I thought it best to help people understand a little better what an interference with contractual relations claim looks like.

To better understand what an interference with contract claim is we look at the elements of such a claim in New York. Under New York law in order to sustain a claim for tortious interference with contract a plaintiff must show:

(a) that a valid contract exists;

(b) that a ‘third party’ had knowledge of the contract;

(c) the defendant intentionally and without justification interfered to cause the contract’s breach; and

(d) that the breach resulted in damage to the plaintiff.

One key guiding point for your consideration:

TORTIOUS INTERFERENCE WITH PROSPECTIVE BUSINESS RELATIONS

A tortious interference with prospective business relations differs slightly. Under New York law in order to sustain a claim for tortious interference with contract a plaintiff must show:

A few guiding points for you to consider if you’re going to bring a tortious interference with prospective relationships claim against someone or another business:

• A tortious interference with prospective contract rights requires a showing of culpable conduct on the part of the defendant, a higher standard by far than the traditional interference with existing contractual relations. See NBT Bancorp Inc. v Fleet/Norstar Financial Group Inc., 87 N.Y.2d 614, 621 (1996). Actionable culpable conduct consists of “physical violence, fraud or misrepresentation, civil suits and criminal prosecutions, and some degrees of economic pressure”. See Guard-Life Corp. v. S. Parker Hardware Mfg. Corp., 50 NY2d 183 [1980]). Moreover, the culpable conduct must be “the proximate cause of the rejection of the… proposed contractual relations”. See Pacheco v United Med. Assoc., 305 AD2d 711 [3d Dept. 2003] quoting Jabbour v. Albany Medical Center, 237 AD2d 787 [3d Dept. 1997]). Essentially you need to allege, and later prove, some real willful and malicious conduct in order to succeed.

• Broad conclusory allegations clearly fail to meet the pleading requirements of a tortious interference with prospective business relations claim.  Conclusory allegations that the defendant acted dishonestly, unfairly, improperly, or wrongfully, without any further explanation of the means employed are insufficient to allege malice or wrongful means. See for example Scholastic Inc. v. Stouffer, 234 F. Supp. 2d 836,851 (S.D.N.Y. 2000); Carvel Corp. v. Noonan, 3 N.Y.3d 182,190 (2004).

• For the claim to be actionable,  the business relationship generally must:

  • be based on more than speculation (for example, potential future sales to past customers from which there is no guarantee of repeat business or a mere offer to sell are generally insufficient to establish the requisite business relationship);
  • be evidenced by an actual and identifiable understanding or agreement which in all probability would have been completed had the defendant not interfered; and
  • exist with an identifiable person or specific customers, rather than the general public.

  (See Cox v. Prudential Found., Inc., 89 N.Y.S.3d 180, 181 (1st Dep’t 2018); Am. Preferred Prescription, 678 N.Y.S.2d at 5.)

This article is for educational purposes only, as are all articles on this blog. The specific facts and circumstances of each case may vary. A consultation with a seasoned business attorney is always your best first step.