Presenting a live 90-minute webinar with interactive Q&A Tortious Interference With Contracts and Prospective Business Advantage: Proving and Defending Claims Navigating the Complexities of Lawsuits Alleging Intentional and Improper Business Disruption WEDNESDAY, FEBRUARY 11, 2015 1pm Eastern | 12pm Central | 11am Mountain | 10am Pacific Today’s faculty features: Aaron D. Hall, CEO & Business Attorney, Thompson Hall Santi Cerny & Katkov , Minneapolis Zachary G. Newman, Partner, Hahn & Hessen , New York The audio portion of the conference may be accessed via the telephone or by using your computer's speakers. Please refer to the instructions emailed to registrants for additional information. If you have any questions, please contact Customer Service at 1-800-926-7926 ext. 10 .
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Navigating the Complexities of Lawsuits Alleging Intentional & Improper Business Disruption 5
Introductions Zachary G. Newman Aaron D. Hall znewman@hahnhessen.com ahall@ThompsonHall.com Hahn & Hessen LLP (New York) Focuses on banking litigation, commercial litigation, fiduciary litigation, breach of fiduciary duty claims, and Thompson Hall Santi Cerny & Katkov art and antique litigation. (Minneapolis) Focuses on business transactions, Represents public and business litigation and intellectual private companies, property. national banking associations, commercial Counsels company owners in complex contracts, employment law, lenders, leasing intellectual property, real estate, companies, and hedge estate planning, and taxes, as well as funds in business litigation in these areas. litigation throughout the United States. 6
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Courts generally recognize three universal members of the “tortious interference family.” The elements of each claim are similar but not identical, and some of these differences are in fact more substantive than linguistic. 8
Tortious Interference with an Existing Contract A plaintiff generally must allege: the existence of a contract between the plaintiff and a 1. third party, 2. the defendant’s knowledge of the contract, 3. the defendant’s intentional inducement of the third party to breach or otherwise render performance impossible, and 4. damages to the plaintiff. 9
The plaintiff must allege actual knowledge, as generally “objective standards like implied knowledge or constructive knowledge are insufficient.” DBS Constr., Inc. v. New Equip. Leasing, Inc ., 2011 U.S. Dist. LEXIS 32681, at *11 (N.D. Ind. Mar. 28, 2011). 10
Tortious Interference with Business Relations Obvious distinction between this claim and its sister claim is that it is not necessary to establish the existence of any actual contract between the parties. Cole v. Homier Distrib. Co. Inc., 599 F.3d 856, 861 (8th Cir. 2010) (applying Missouri law). 11
A claimant must only show that: 1. it had a business relationship with a third party and the breaching party knew of that relationship and 2. intentionally interfered with it, 3. the breaching party acted solely out of malice or used improper or illegal means that amounted to a crime or independent tort, and 4. the breaching party’s interference caused injury to the relationship with the third party. 12
What exactly qualifies as a “business relationship” 13
A business relationship is “‘something less than a contractual right, something more than a mere hope’ [and] exists only when there is a reasonable probability that a contract will arise from the parties’ current dealings.” Alvord-Polk, Inc. v. F. Schumacher & Co. , 37 F.3d 996, 1015 (3d Cir. 1994) (quoting Thompson Coal Co. v. Pike Coal Co ., 488 Pa. 198, 209, 412 A.2d 466, 471 (Pa. 1979)) 14
Tortious Interference with an “Economic Advantage” If NO valid contract exists and the ability to establish a business relationship is MURKY , some jurisdictions may recognize a cause of action for tortious interference with an “economic advantage.” 15
A claimant generally must show 1. an existing reasonable expectation or reasonable expectation of economic benefit or advantage; 2. the defendant’s knowledge of that expectancy ; 3. The defendant’s wrongful, intentional interference with that expectancy; 4. the reasonable probability that the claimant would have received the anticipated economic benefit in the absence of the defendant’s interference; and damages resulting from the defendant’s interference. Lightning Lube, Inc. v. Witco Corp., 4 F.3d 1153, 1167 (3d Cir. 1993) 16
A valid business expectancy is one in which there is a reasonable likelihood or probability that the expectancy will come to fruition; mere wishful thinking is not sufficient to support a claim . First Public Corp. v. Parfet , 246 Mich. App. 182, 199, 631 N.W.2d 785 (Mich. Ct. App. 2001), vacated in part on other grounds , 468 Mich. 101, 658 N.W.2d 477 (Mich. 2003) Trepel v. Pontiac Osteopathic Hosp ., 135 Mich. App. 361, 377, 354 N.W.2d 341 (Mich. Ct. App. 1984) 17
What’s Protected? Historical Relationships Course of Dealing a customer relationship as “a regular course of similar prior dealings suggests a protectable right because the relationship existed for close to a valid business expectancy.” 20 years, even though every year Slone v. Purina Mills, Inc., the customer offered its 927 S.W.2d 358, 370 (Mo. Ct. business App. 1996). to all bidders. Conoco, Inc. v. Inman Oil Co. Inc., 774 F.2d 895, 907 (8th Cir. 1985) (applying Missouri law). According 18
Independent Tortious or Wrongful Conduct 19
What distinguishes legitimate competitive economic activity — something that is protected in our freemarket system — from actionable interference? Generally requires proof “ the defendant The act must be tortious, meaning that was guilty of fraud, misrepresentation, the plaintiff “must plead and prove at intimidation or molestation or that the least some improper motive or improper defendant acted maliciously .” means.” Blake v. Levy, 191 Conn. 257, 261, 464 A.2d 52 (Conn. Golembeski v. Metichewan Grange No. 190, 20 Conn. App. 1983) 699, 702, 569 A.2d 1157 (Conn. App. Ct. 1990) A plaintiff must also show actual loss Most courts require this conduct to “resulting from the improper be “knowing” or “intentional”— mere interference with the contract; the tort is negligence will not suffice. not complete unless there has been actual damages suffered.” White Plains Coat & Apron Co., Inc. v Cintas Corp., 8 N.Y.3d 422, 426, 867 N.E.2d 381, 835 N.Y.S.2d 530 Appleton v. Bd. of Educ. of Town of Stonington, 254 Conn. (N.Y. 2007) 205, 213, 757 A.2d 1059 (Conn. 2000) 20
Examples of (Wrongful) Conduct Improper Not Improper Misuse of confidential Interference after the information underlying contract expired Defamation Relying upon personal Unethical conduct knowledge and memory Bribery or fraud to reconstitute customer lists Unfounded litigation Exercise of a lawful right Sharp business practices (e.g., foreclosing on UCC Unfair competition lien) 21
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