Interference Torts
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Avoiding Legal Landmines When You Compete for Business:
The "Interference" Torts

By: Justene M. Adamec

Let's suppose you open a widget manufacturing company and you want to sell some widgets. Most people who buy widgets are already buying them somewhere and it's your job to convince them to buy from you. Your glorious ads have not done the trick and you decide to get more aggressive and set up meetings with the Chief Executive Officers of various widget-buyers. You land the account of National Widgie Co. Before you came along, National Widgie Co. bought its widgets from your competitor, Joe Widgetmaker. A month after you start selling to National Widgie Co., Joe Widgetmaker sues you for interference with contract and interference with prospective economic advantage. Now what?

This brief article introduces you to those two torts. Only California law is presented.

  • The elements of intentional interference with contract are:
    • the existence of a contractual relationship,
    • knowledge by the defendant of the relationship,
    • intentional acts to disrupt the relationship,
    • actual disruption
    • damages to the plaintiff.
  • The elements of intentional interference with prospective business advantage are similar and the differences are highlighted:
    • an economic relationship between the plaintiff and a third party containing a probable future economic benefit or advantage to plaintiff
    • knowledge by the defendant of the existence of the relationship
    • intentional, wrongful acts to disrupt the relationship
    • actual disruption
    • damages to the plaintiff.

In California, the courts have recognized that a contract is worthy of more protection than another economic relationship between two parties. Thus, in 1995, the California Supreme Court made clear that in order to interfere with prospective economic advantage, the act that interferes must itself be wrongful. The exact parameters of "wrongfulness" are not clear yet but some examples are misuse of trade secrets and libel.

Liability for either tort would be the amount of actual damages caused and punitive damages, which, as the name suggests, are an additional sum designed to punish the defendant. There are many defenses to the tort which are beyond the scope of this article.

In the example which began this article, we would need to know whether Joe Widgetmaker had a contract with National Widgie Company, how much you knew about their relationship, and whether you did anything more than meet with National Widgie Company's Chief Executive Officer. The facts as presented above, without more, would not result in liability.

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