“Tortious interference with contract” is a common claim between competitors and business adversaries, but is often difficult to establish.
Under New York law, a plaintiff has to prove the following elements in order to establish tortious interference:
- The existence of a valid contract
- Defendant’s knowledge of the contract
- Defendant’s intentional procurement of the third party’s breach
- Lack of justification for the procurement
- Breach of the contract
- Damages caused by breach of the contract
Many interferences are justifiable through what is commonly known as the “economic interest defense.” If the defendant has an economic interest in the third party’s business (such as being a shareholder, creditor, or contract counterparty), it can justify inducement of a breach of contract in order to protect that interest.
Nonetheless, tortious interference has been found in certain cases:
- Plaintiff had five-year exclusive contracts with a number of customers. Defendant, who had no existing contracts with the customers, induced the customers to breach those contracts and switch providers from Plaintiff to Defendant, even after Plaintiff gave Defendant notice of its contracts and demanded that Defendant cease and desist. The New York Court of Appeals held that Defendant had no justification defense based on its economic interest in soliciting the customers’ business. White Plains Coat & Apron Co. v. Cintas, 8 N.Y.3d 422 (2007).
- Plaintiff entered into a letter agreement with a tenant under a lease to negotiate a purchase of the lease. The letter agreement had confidentiality and exclusivity clauses. The tenant then showed the letter agreement to Defendant and negotiated with Defendant to purchase the lease (despite the exclusivity clause being in effect). In this case, Plaintiff was able to bring a claim for tortious interference against Defendant as Defendant had “merely a generalized economic interest in soliciting Associates to sell the lease,” which did not justify the procurement of the breach. Normandy Real Estate Partners v. 24 E. 12th St. Assoc., 2019 N.Y. Slip Op. 00060 (1st Dept., Jan. 8, 2019).