Tortious Interference

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Tortious interference is the act of intentionally interfering with someone’s business. This may be by directly interfering with a business deal, or by interfering with the day-to-day operations – or even by spreading false claims about the business. Tortious interference is interference that is so egregious as to allow the harmed party to file a civil lawsuit under a “tort,” or reason of serious interference. This is a civil matter and, as such, is handled by the civil courts.

Tortious interference is all about intent. If the person doing the interfering did not intend to cause harm, then he has nothing to worry about. However, if he did something intentional for the purpose of interfering with normal business operations, then he is likely guilty of tortious interference. To explore this concept, consider the following tortious interference definition.

Definition of Tortious Interference

Noun

  1. The act of interfering with someone’s business by making a false claim that ultimately damages the business.

Origin of Tort

1350-1400       Middle English: injury, wrong

What is Tortious

The word “tortious” is an adjective used to refer to an act involving a tort. A tort is an act that infringes upon the rights of others, and it is one for which the offender can be sued. Because torts are civil actions between private individuals, offenders are not punished with fines or imprisonment. Instead, a court will order the offender to pay the other party to compensate him for his damages. A court may also issue an order against the offender to stop him from continuing to take part in a tort, such as if he is found guilty of trespassing or slander.

What is Tortious Interference

Tortious interference occurs when someone intentionally interferes with someone else’s business. For example, tortious interference exists if someone makes a claim that a restaurant participates in unhealthy business practices. The restaurant can then sue that person for making a false claim. If, however, a health inspector follows up on that claim, and the claim turns out to be true, then the person making the claim cannot be held liable, and restaurant will probably be shut down. Tortious interference is all about intent. If someone is telling the truth, then he cannot be guilty of tortious interference.

Other types of tortious interference could involve one party blackmailing another into breaking his contract with the business, or refusing to make a delivery of the goods necessary for a party to uphold his purchasing contract with another party. On a related note, a tort of negligent interference refers to an outsider’s negligence having a negative effect on a business relationship between two parties. For instance, the blocking off of a roadway that a utility company would need to take to reach and fix downed power lines in a particular area would be considered a tort of negligent interference. The term “tortfeasor” is used to describe the individual who interferes with the business, or business relationship held between the other parties.

Types of Tortious Interference

There are two types of tortious interference for which one can be sued. These are:

  • Tortious interference with a contract; and
  • Tortious interference with a business relationship.

Those who sue for either of these torts may be entitled to damages in a civil court of law. These types of tortious interference are explained below in more detail.

Tortious Interference with a Contract

A tortious interference with a contract happens when a person who is not a party to a contract somehow influences one of the contract parties to breach the contract. This only applies where there is a written contract between two or more parties. Consider the following example of tortious interference with a contract:

Cathy and Amy have entered into a contract in which Cathy is to sell to Amy 1,500 dollhouses for Amy’s toy store. Amy agrees to pay $50 per dollhouse. However, two days before the sale is to take place, Delilah tells Cathy that Amy is cheating her by only paying her $50 for each dollhouse, insisting they are worth much more. Delilah claims to know that these dollhouses in particular sell for $75.00 or more.

Cathy then breaches her contract with Amy by refusing to sell the dollhouses to her unless Amy pays $75 for each one. Here, Amy would be entitled to sue Delilah for tortious interference with a contract because Delilah’s actions made Cathy decide to breach the contract. In most states, Amy would only be able to hold Delilah liable for tortious interference with a contract if the following elements could be proven:

  • That a contract existed between her and someone else (here, Cathy);
  • That Delilah knew the contract existed;
  • That Delilah purposely did something to get Cathy to breach the contract, or to disrupt Cathy’s ability to hold up her end of the contract;
  • That, because of what Delilah did, Cathy actually did breach the contract, or was otherwise unable to hold up her end of the contract;
  • That Amy suffered damages caused by Cathy’s breach of, or inability to fulfill, the contract.

Tortious Interference with a Business Relationship

Tortious interference with a business relationship is similar to tortious interference with contract, except that in the former, an actual contract need not exist. To use the previous example, tortious interference with a business relationship would exist even if Cathy and Amy had not entered into a written contract. All Delilah had to do was interfere with the transaction, and Amy would be within her rights to sue Delilah for tortious interference with a business relationship.

The existence of a written contract is usually the only difference between tortious interference with a business relationship and tortious interference with contract. Tortious interference with a business relationship exists as a separate tort because it recognizes that harm can still be done to a business relationship, even if the parties have not yet entered into a contract, and are still working out the details of what is to come.

Tortious Interference Example Involving a Scorned Former Friend

An example of tortious interference involves former friends turned bitter enemies, and one party’s alleged efforts to destroy the other parties’ business and reputation. Joseph and Lindsey Eldridge owned and operated two companies: Harrison Companies, LLC, and Harrison Companies Property Management, LLC. Through their companies, located in Summit County, Utah, the Eldridges managed property and provided other services for wealthy homeowners. The Eldridges’ business therefore relied heavily on their positive reputation.

David Johndrow was a former friend and client of the Eldridges who would recommend their services to friends and associates in the local area. However, his friendship with the Eldridges only lasted a year, and eventually it dissolved to the point where legal action was taken.

Rather than suing the Eldridges, however, Johndrow chose to hire an “investigative team” to drudge up embarrassing facts about the Eldridges. Johndrow threatened the Eldridges with revealing what he had discovered, if they did not retract accusations they had supposedly made against him, and compensate him for a phone they allegedly stole from him. The Eldridges refused to bow to Johndrow’s demands, so he emailed and verbally communicated embarrassing information to several of the Eldridges’ clients.

The Eldridges then sued Johndrow on several grounds, including tortious interference with economic relations, and tortious interference with prospective economic relations. The Eldridges’ alleged tortious interference such as Johndrow’s interference with their business through an improper means, and argued that his only goal was to hurt the Eldridges’ business. As such, the Eldridges accused Johndrow of interfering with their business with malicious intent.

Johndrow moved for summary judgment on the tortious interference claims, amongst others. The District Court held that the information that Johndrow had become privy to was true, at least in part. However, the court denied summary judgment due to the claims being based on allegations that Johndrow had acted out of malice. Johndrow appealed the matter to the Supreme Court of Utah. The Court ultimately reversed the lower court’s decision, holding that “a claim for tortious interference may only succeed where the defendant has employed an improper means.”

Said the Court:

“…we conclude that in the absence of any improper means, an improper purpose is not grounds for tortious interference liability. In order to win a tortious interference claim under Utah law, a plaintiff must now prove ‘(1) that the defendant intentionally interfered with the plaintiff’s existing or potential economic relations, (2) … by improper means, (3) causing injury to the plaintiff.’

The Eldridges’ tortious interference claims fail the second prong of this test: they have failed to produce evidence of an improper means. The District Court’s denial of summary judgment on the tortious interference claims is therefore reversed, and the matter is remanded for further action consistent with this opinion.”

Related Legal Terms and Issues

  • Contract – An agreement between two or more parties in which a promise is made to do or provide something in return for a valuable benefit.
  • Slander – The act of making a false statement with the intent to damage another’s reputation.
  • Summary Judgment – A final decision on the case, handed down by the judge on the basis of the statements and evidence presented, without a full trial.
  • Tort – An intentional or negligent act, a civil wrong, as opposed to a criminal act, which causes harm to another.
  • Trespassing – Entering a piece of land or property without the landowner’s permission.